Are tips included in the Net Sales calculation for an Auntie Annes franchise?
Auntie_Annes Franchise · 2024 FDDAnswer from 2024 FDD Document
that are paid to you by a customer or by a third-party delivery or catering service (e.g., Uber Eats, Postmates, Grubhub, ezCater, or DoorDash) (a "TPS") in connection with delivery or catering services related to your Franchised Business (recognizing that though the TPS may pay you an amount equal to the purchase price charged to the customer less a commission, other fees, and any discounts, credits, or coupons applied to the order, such commission, fees, discounts, credits, and coupons will not be deducted from your Net Sales). Net Sales will not include (a) the initial sales or reloading of gift cards, (b) discounts, (c) the sale of food or merchandise for which refunds have been made in good faith to customers, (d) the discounted portion of employee meals, (e) sales, meals, use or excise tax imposed by a governmental authority directly on sales and collected from customers, provided that the amount for the tax is added to the selling price or absorbed therein and is actually paid by you to a governmental authority, (f) the sale of equipment used in the operation of the Franchised Business, or (g) tips.
Source: Item 22 — CONTRACTS (FDD page 106)
What This Means (2024 FDD)
According to Auntie Annes's 2024 Franchise Disclosure Document, tips are explicitly excluded from the calculation of Net Sales. This is important for franchisees because Net Sales is the basis for calculating royalty fees and advertising contributions. By excluding tips from Net Sales, Auntie Annes ensures that franchisees are not paying a percentage of customer tips to the company.
In addition to tips, the FDD specifies other items that are not included in Net Sales. These exclusions include the initial sales or reloading of gift cards, discounts, refunds made in good faith to customers, the discounted portion of employee meals, sales, meals, use or excise tax imposed by a governmental authority directly on sales and collected from customers, and the sale of equipment used in the operation of the Franchised Business.
This definition of Net Sales helps to clarify the financial obligations of the franchisee to Auntie Annes, ensuring that fees are based on actual revenue from product sales rather than extraneous income sources or amounts collected for taxes. This is a common practice in franchising, as it aligns the franchisor's income with the franchisee's core business performance.