How does the Azal Coffee Franchise Agreement define Gross Sales?
Azal_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
(2) The Franchise Agreement defines Gross Sales as the entire amount of the franchisee's revenues from the ownership or operation of the Franchise Business and any business at or about the Franchise Location or any approved remote locations including the proceeds of any business interruption insurance and any revenues received from the lease or sublease of a portion of the Franchise Location, whether the revenues are evidenced by cash, credit, checks, gift certificates, electronic payment, digital currency, food stamps, coupons and premiums (unless exempted by us), services, property or other means of exchange, minus only: (a) the amount of any sales taxes that are collected and paid to the taxing authority; (b) approved discounts given to customers if the non-discounted price is included in the revenues; and (c) cash refunded and credit given to customers and receivables uncollectible from customers if the cash, credit or receivables are or were included in revenues. Gross Sales include fees charged by third-party delivery service providers and are deemed received by the franchisee at the time the goods, products, merchandise, or services from which they derive are delivered or rendered or at the time the relevant sale takes place, whichever occurs first. Revenues of property or services (for example, "bartering" or "tradeouts") are valued at the prices applicable to the products or services exchanged for those revenues at the time the revenues are received.
Source: Item 6 — OTHER FEES (FDD pages 12–19)
What This Means (2024 FDD)
According to Azal Coffee's 2024 Franchise Disclosure Document, Gross Sales are defined within the Franchise Agreement as the total revenue a franchisee generates from operating the Azal Coffee franchise. This includes all revenue sources at the franchise location or any approved remote locations. It also includes proceeds from business interruption insurance and any revenues from leasing or subleasing part of the franchise location. The form of payment is irrelevant, encompassing cash, credit, checks, gift certificates, electronic payments, digital currency, food stamps, coupons, services, property, or other exchange methods. Gross Sales also include fees charged by third-party delivery services. These sales are considered received when the goods or services are delivered or the sale occurs, whichever comes first. Bartering or trade-outs are valued at the prices applicable to the products or services exchanged.
However, Azal Coffee franchisees can deduct certain items from their gross sales figures. These deductions include sales taxes collected and remitted to the appropriate taxing authority, approved discounts given to customers (provided the non-discounted price was initially included in the revenue), and cash refunds or credits issued to customers. Additionally, franchisees can deduct uncollectible receivables from customers if those receivables were previously included in the revenue calculation.
Understanding the definition of Gross Sales is crucial for Azal Coffee franchisees because it directly impacts royalty fees and other financial obligations to the franchisor. Franchisees need to accurately track and report all revenue streams while properly accounting for allowable deductions to ensure compliance with the Franchise Agreement and avoid potential disputes or penalties. The comprehensive nature of the Gross Sales definition means franchisees must maintain meticulous records of all transactions, including various payment methods and any bartering activities.