What items are subtracted from total revenues to calculate Gross Sales for an Azal Coffee franchise?
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 calculated by subtracting specific items from the franchisee's total revenues. The document specifies that Gross Sales include all revenues from the franchise's operation, including proceeds from business interruption insurance and revenues from leasing or subleasing a portion of the franchise location. These revenues can be in the form of cash, credit, checks, gift certificates, electronic payments, digital currency, food stamps, coupons, services, or property.
However, Azal Coffee franchisees can subtract three specific items from their total revenues to arrive at Gross Sales. These deductions include the amount of sales taxes collected and paid to the taxing authority, approved discounts given to customers if the non-discounted price is included in the revenues, and cash refunded and credit given to customers, as well as receivables uncollectible from customers, provided these were initially included in the revenues.
It is important to note that fees charged by third-party delivery service providers are included in Gross Sales and are considered received by the franchisee when the goods or services are delivered or the sale takes place, whichever comes first. Additionally, revenues from bartering or trade-outs are valued at the prices applicable to the products or services exchanged at the time the revenues are received. This definition provides clarity for Azal Coffee franchisees in accurately reporting their Gross Sales, which is essential for calculating royalty fees and other financial obligations to the franchisor.