When are revenues from third-party delivery services deemed received by the Azal Coffee franchisee?
Azal_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
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 fees charged by third-party delivery service providers. These revenues are considered received by the franchisee either when the goods, products, merchandise, or services are delivered or rendered, or when the relevant sale takes place, whichever comes first. This definition is important because it dictates when Azal Coffee franchisees must account for these revenues for royalty and other fee calculations.
For a prospective Azal Coffee franchisee, this means that the timing of revenue recognition for third-party delivery services is clearly defined. Whether the franchisee receives payment immediately or later from the third-party delivery service, the revenue is accounted for at the time of delivery or sale. This could impact the franchisee's cash flow management and financial reporting.
This policy ensures that Azal Coffee franchisees consistently report gross sales, regardless of the payment timeline from third-party delivery services. Franchisees should maintain accurate records of delivery and sales dates to properly calculate and remit royalties and other fees to Azal Coffee. Understanding this policy is crucial for financial planning and compliance with the franchise agreement.