What does the Bang Cookies Franchise Agreement define as 'Gross Sales'?
Bang_Cookies Franchise · 2024 FDDAnswer from 2024 FDD Document
"Gross Sales" refers to and means the total dollar sales from all business and customers of the Franchised Business and includes the total gross amount of revenues and sales from whatever source derived, whether in form of cash, credit, agreements to pay or other consideration including the actual retail value of any goods or services traded, borrowed, or received by Franchisee in exchange for any form of non-money consideration (whether or not payment is received at the time of the sale), from or derived by Franchisee or any other person or Corporate Entity from business conducted or which started in, on, from or through the Franchised Business, Franchisee's Shop Location, and/or Franchisee's Shop Facility whether such business is/was conducted in compliance with or in violation of the terms of this Agreement. Supplementing the foregoing, Gross Sales further includes the total gross amount of revenues and sales from whatever source derived from and/or derived by Franchisee (including any person and/or Corporate Entity acting on behalf of Franchisee) from business conducted within and/or outside the Designated Territory that is related to the Franchised Business and/or a Competitive Business located and/or operated at Franchisee's Shop Location, at Franchisee's Shop Facility, within the Designated Territory, outside the Designated Territory, and/or otherwise (the foregoing does not constitute approval for Franchisee's operation of a Competitive Business and/or the operation of a Bang Cookies Shop outside of the Designated Territory). Gross Sales do not include (a) sales taxes that Franchisee collects and remits to the proper taxing authority, and (b) authorized promotional discounts that Franchisee provides to Shop customers.
Source: Item 23 — RECEIPTS (FDD pages 56–245)
What This Means (2024 FDD)
According to Bang Cookies's 2024 Franchise Disclosure Document, Gross Sales are defined as the total dollar sales from all business and customers of the Franchised Business. This includes all revenues and sales, regardless of the source, and whether received in cash, credit, or other forms of consideration. The gross sales include the retail value of goods or services that the franchisee trades, borrows, or receives in exchange for non-monetary consideration, regardless of when payment is received. Gross Sales also include revenues and sales derived by the franchisee from business conducted within or outside the Designated Territory that is related to the Franchised Business or a Competitive Business located or operated at the Franchisee's Shop Location or Facility, whether within or outside the Designated Territory.
For a prospective Bang Cookies franchisee, this definition is important because franchise fees and royalties are typically calculated as a percentage of gross sales. Therefore, understanding what constitutes gross sales is crucial for accurately calculating these payments. The inclusion of sales from business activities outside the designated territory, if related to the franchised business, could increase the royalty payments owed to Bang Cookies.
However, the definition of Gross Sales does not include sales taxes that the franchisee collects and remits to the proper taxing authority, nor does it include authorized promotional discounts that the franchisee provides to shop customers. This exclusion is beneficial for the franchisee, as it reduces the base amount on which royalties are calculated. Franchisees should ensure they properly document and report these exclusions to avoid any disputes with Bang Cookies regarding royalty payments.
It is important to note that the definition explicitly states that the inclusion of sales from a Competitive Business does not constitute approval for the franchisee's operation of a Competitive Business or the operation of a Bang Cookies Shop outside of the Designated Territory. This clarifies that while these sales are included in Gross Sales for royalty calculation purposes, they do not grant any rights or permissions to operate outside the scope of the Franchise Agreement.