In the Beard Papas franchise agreement, what is included in the definition of 'Gross Sales'?
Beard_Papas Franchise · 2025 FDDAnswer from 2025 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 (2025 FDD)
According to Beard Papas's 2025 Franchise Disclosure Document, "Gross Sales" is comprehensively defined for calculating royalty fees, brand development fund fees, and local marketing expenses. Gross Sales include the total dollar sales from all business and customers of your Shop, encompassing all revenues and sales, regardless of the source. This includes cash, credit, agreements to pay, or any other form of consideration, such as the retail value of goods or services traded or borrowed, whether or not payment is immediately received. This definition extends to all business conducted in, on, from, or through your Shop, irrespective of compliance with the Franchise Agreement terms. It also includes revenue derived from business conducted within or outside your designated territory that is related to your Shop or any competitive business at your Shop location.
However, the definition of Gross Sales for a Beard Papas franchise specifically excludes certain items. These exclusions are limited to (a) sales taxes that you collect and remit to the proper taxing authority, and (b) authorized promotional discounts that you provide to customers. This means that franchisees do not pay royalties or other percentage-based fees on these amounts.
Understanding the inclusions and exclusions in the Gross Sales definition is crucial for a prospective Beard Papas franchisee. It directly impacts the calculation of several ongoing fees, including the 5% royalty fee, up to 2% brand development fund fee, and the 2% local marketing expenditure requirement. Accurate tracking and reporting of Gross Sales, with proper exclusion of sales taxes and authorized discounts, is essential for compliance with the franchise agreement and to avoid potential underreporting penalties, which could trigger an audit at the franchisee's expense.