How is 'Gross Sales' defined for an Aplus Franchised Business, and what items are specifically included in this calculation?
Aplus Franchise · 2024 FDDAnswer from 2024 FDD Document
- "Gross Sales" means total amount of your sales and any merchandise inventory variation including the total amount of consideration, valued in U.S. currency, received by you for sales from or in the Franchised Business from: (a) merchandise, (b) services, (c) equipment rentals, and (d) merchandise inventory variation, if any, as further described in the Manual, without deduction on account of any of the following: (a) the cost of goods sold, including taxes paid by you in procuring goods for resale; (b) the cost of material used, labor or service cost, interest paid or any other expense; or (c) the cost of transportation of the goods.
Gross Sales include all barter and exchange transactions for which you furnish services or products in exchange for goods or services to be provided by the vendor, supplier or customer will be valued at the full retail value of goods and services bartered in exchange for the good or services provided to you.
Gross Sales also includes the proceeds of any business interruption insurance paid to you.
Gross Sales also includes any payments you receive from vendors.
Chargebacks are not deducted from Gross Sales.
The following are not included in Gross Sales: (a) gasoline, diesel, and other fuel sales (if applicable, when operating a Fueling Station), (b) the amount of tax imposed by the United States or any city, county, state, or other governmental entity or agency or instrumentality thereof upon or with respect to retail sales of tangible personal property measured by a stated percentage of sales price or gross receipts, whether imposed upon you as a seller or upon the customer as a purchaser; (c) any deposits refunded to customers; (d) the sale price of returned merchandise by customers when the full sale price is refunded either in cash or credit, but this exclusion shall not apply in any instance when the customer, in order to obtain the refund, is required to purchase other property at a price equal to or greater than the amount charged for the property which is returned. For purposes of calculating Gross Sales, refund or credit of the entire amount shall be deemed to be given when the purchase price, less re-handling and restocking costs, is refunded or credited to the customer; (e) lottery and other commissions; (f) money orders (face value); (g) ATM income from fees, commissions, and rentals; (h) money order fees; (i) prepaid product sales and commissions on products from designated supplier; (j) federal, state and local excise taxes on cigarettes. For purposes of this excise tax exclusion, the calculation and deduction of the above taxes shall be calculated based on the tax rate that is in effect on the first day of the month, and is only applicable to cigarette products that are authorized as a part of the APLUS cigarette planograms; (k) car wash and automotive repairs; and (l) proprietary SUNOCO food service businesses and convenience store product offerings from which no royalty is collected in accordance with the terms of the applicable participation agreement.
Source: Item 23 — RECEIPT (FDD pages 68–302)
What This Means (2024 FDD)
According to Aplus's 2024 Franchise Disclosure Document, 'Gross Sales' for an Aplus Franchised Business is defined as the total amount of sales and any merchandise inventory variation, including the total amount of consideration received in U.S. currency. This includes sales from merchandise, services, equipment rentals, and merchandise inventory variation. The calculation does not allow for deductions based on the cost of goods sold (including taxes paid for procuring goods for resale), the cost of materials, labor, service costs, interest paid, any other expenses, or the cost of transportation of goods. Gross Sales also include all barter and exchange transactions, valued at the full retail value of the goods and services bartered. Additionally, proceeds from business interruption insurance and payments received from vendors are included in Gross Sales.
For a prospective Aplus franchisee, this definition is crucial because the Royalty Fee is calculated based on Gross Sales. Understanding what constitutes Gross Sales ensures accurate royalty payments and financial reporting. The inclusion of business interruption insurance proceeds and vendor payments in Gross Sales means that these revenues are also subject to royalty fees. Conversely, the explicit exclusion of certain items like gasoline sales, taxes, customer refunds, lottery commissions, and ATM income can reduce the royalty burden.
It is important to note that chargebacks are not deducted from Gross Sales, which could increase the royalty fees owed, even if the franchisee does not ultimately receive revenue from those sales. Additionally, all sales must be processed through approved EPOS systems and reported as Gross Sales, and no other supplemental or secondary EPOS system may be used. Aplus retains the right to designate a designated or approved supplier for the EPOS system, and the franchisee must use this supplier within thirty (30) days of notice from Aplus.
Several specific items are excluded from the Gross Sales calculation. These include gasoline, diesel, and other fuel sales (if applicable when operating a Fueling Station), sales taxes, customer deposits refunded, the sale price of returned merchandise when fully refunded, lottery and other commissions, money orders (face value), ATM income from fees, commissions, and rentals, money order fees, prepaid product sales and commissions on products from designated suppliers, federal, state and local excise taxes on cigarettes, car wash and automotive repairs, and proprietary SUNOCO food service businesses and convenience store product offerings from which no royalty is collected in accordance with the terms of the applicable participation agreement. Understanding these inclusions and exclusions is vital for accurate financial management and royalty reporting for Aplus franchisees.