How are revenues from bartering or tradeouts valued for Azal Coffee's Gross Sales calculation?
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 include all revenues from operating the franchise, including revenues received in forms other than cash. This encompasses revenues evidenced by cash, credit, checks, gift certificates, electronic payment, digital currency, food stamps, coupons and premiums, services, property, or other means of exchange.
Specifically, the FDD states that revenues from property or services, such as bartering or tradeouts, are valued at the prices applicable to the products or services exchanged at the time the revenues are received. This means that if an Azal Coffee franchisee engages in a bartering arrangement, the revenue recognized for gross sales purposes is the normal retail price of the goods or services the franchisee would have otherwise sold.
For a prospective Azal Coffee franchisee, this means that all transactions, including non-cash transactions, must be accurately recorded and reported for royalty calculation purposes. The valuation of bartered goods or services should be based on the standard pricing of those items at the time of the transaction to ensure accurate gross sales reporting and royalty payments.