Are sales taxes included in the calculation of 'Gross Sales' for a Bang Cookies franchise?
Bang_Cookies Franchise · 2024 FDDAnswer from 2024 FDD Document
Note 3: Gross Sales – "Gross Sales" means the total dollar sales from all business and customers of your Shop 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 you 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 you or any other person or Corporate Entity from business conducted or which started in, on, from or through your Shop and/or your Shop Location, whether such business is conducted in compliance with or in violation of the terms of the Franchise Agreement. Gross Sales include the total gross amount of revenues and sales from whatever source derived from and/or derived by you (including any person and/or Corporate Entity acting on your behalf) from business conducted within and/or outside your designated territory that is related to your Shop and/or a competitive business located and/or operated at your Shop Location, within your designated territory, outside your designated territory, and/or otherwise. Gross Sales do not include (a) sales taxes that you collect and remit to the proper taxing authority, and (b) authorized promotional discounts that you provide to customers.
Source: Item 6 — OTHER FEES (FDD pages 13–17)
What This Means (2024 FDD)
According to Bang Cookies's 2024 Franchise Disclosure Document, the calculation of Gross Sales does not include sales taxes that the franchisee collects and remits to the proper taxing authority. Gross Sales are defined as the total dollar sales from all business and customers of your Shop 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 you 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 you or any other person or Corporate Entity from business conducted or which started in, on, from or through your Shop and/or your Shop Location, whether such business is conducted in compliance with or in violation of the terms of the Franchise Agreement. Gross Sales include the total gross amount of revenues and sales from whatever source derived from and/or derived by you (including any person and/or Corporate Entity acting on your behalf) from business conducted within and/or outside your designated territory that is related to your Shop and/or a competitive business located and/or operated at your Shop Location, within your designated territory, outside your designated territory, and/or otherwise.
This definition of Gross Sales is important because several fees payable to Bang Cookies are calculated as a percentage of Gross Sales. These include the royalty fee, which is 6% of weekly Gross Sales, and local marketing expenses, which must be at least 2% of quarterly Gross Sales. The brand development fund fee, which Bang Cookies currently does not charge but reserves the right to implement, could also be up to 2% of weekly Gross Sales.
By excluding sales taxes from the Gross Sales calculation, Bang Cookies ensures that franchisees are not paying royalties or other fees on money that is simply being passed through to government tax authorities. This is a standard practice in franchising, as it ensures that franchisees are only paying fees on their actual revenue. Franchisees should ensure they understand exactly how Gross Sales are defined in their Franchise Agreement to accurately calculate and report their sales figures.