Are proceeds from business interruption insurance included in Gross Sales for an Aplus franchise?
Aplus Franchise · 2024 FDDAnswer from 2024 FDD Document
Note 1: "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 APLUS Store from: (a) merchandise, (b) services, (c) equipment rentals, and (d) merchandise inventory variation, if any, as further described in the Systems 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 the 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.
Source: Item 6 — OTHER FEES (FDD pages 16–28)
What This Means (2024 FDD)
According to Aplus's 2024 Franchise Disclosure Document, gross sales include proceeds from business interruption insurance. This means that if an Aplus store experiences a temporary shutdown due to unforeseen circumstances like a natural disaster or other covered event, the insurance money received to compensate for lost income is factored into the store's gross sales.
For a prospective Aplus franchisee, this is a notable point because gross sales are often used to calculate royalty fees and other payments to the franchisor. By including business interruption insurance proceeds in gross sales, Aplus ensures that it receives its share of revenue even during periods when the store is not fully operational.
However, the FDD also specifies several items that are not included in gross sales, such as gasoline and diesel fuel sales (if applicable), sales taxes, customer refunds, lottery commissions, money order values, ATM income, and certain excise taxes on cigarettes. Understanding what constitutes gross sales is crucial for franchisees to accurately calculate their financial obligations to Aplus and to assess the overall profitability of their franchise.