Are receipts from credit sales included in the Gross Revenue calculation for an Aw franchise, regardless of collection?

According to Aw's 2025 Franchise Disclosure Document, Gross Revenue includes receipts from credit sales, regardless of whether the amounts have actually been collected. Specifically, Gross Revenue is defined as the total amount of all receipts from the sale of food, beverages, merchandise, or other products or services, whether the payment is made in cash, exchange, or credit. The inclusion of credit sales in Gross Revenue, regardless of collection status, means that Aw franchisees must pay royalty fees and marketing fund contributions on these sales even if they haven't yet received the money from customers.

This definition has significant implications for franchisees' cash flow management. Franchisees need to ensure they have sufficient funds to cover royalty and marketing fund obligations, even when a portion of their sales are on credit and payment is pending. This could affect their profitability, especially if there are delays or defaults in customer payments. Aw also specifies some exclusions from Gross Revenue, including sales, use, or service taxes collected from customers and paid to the appropriate taxing authority, promotional customer discounts and coupons, authorized employee discounts, and complimentary products for promotional or charitable purposes.

Aw franchisees are required to report their Gross Revenue weekly and make payments for royalty fees and marketing fund contributions based on these reported figures. Aw has the right to audit the franchisee's records to verify the accuracy of these reports. If an audit reveals an understatement of Gross Revenue, the franchisee will be required to pay the additional royalty fees and marketing fund contributions due, along with interest on the understated amount. Furthermore, if the understatement exceeds two percent or is due to the franchisee's failure to provide timely and accurate reports, Aw may also require the franchisee to reimburse the costs of the audit.

Therefore, it is crucial for prospective Aw franchisees to understand how Gross Revenue is defined and calculated, and to maintain accurate records of all sales, including credit sales, to ensure compliance with the franchise agreement and avoid potential penalties.