For a Beef O Bradys franchise, who determines the reasonableness of over-rings, allowances, and discounts when calculating Adjusted Gross Sales?
Beef_O_Bradys Franchise · 2025 FDDAnswer from 2025 FDD Document
- 6.7 Definition of "Adjusted Gross Sales." As used in this Agreement, "Adjusted Gross Sales" means Gross Sales less: (i) complimentary food and beverage service, or sums collected and actually paid by you for any sales, drink or other excise tax imposed by any duly constituted governmental authority on alcoholic beverages sales in a state that prohibits the payment of Royalties on such sales; (ii) the value of gift certificates and the amounts paid for them; and, (iii) the amount of all reasonable over-rings, allowances, discounts to customers, tips to employees (including discounts attributable to coupon sales, provided they have been included in Gross Sales) as determined by us in our sole judgment.
If we determine in our sole judgment that the amount of over-rings, allowances, and discounts to customers is excessive as compared to the system-wide average, we may require you to increase the amount of your Adjusted Gross Sales in the amount that we determine.
Source: Item 23 — RECEIPTS. (FDD pages 66–330)
What This Means (2025 FDD)
According to Beef O Bradys's 2025 Franchise Disclosure Document, Beef O Bradys determines the reasonableness of over-rings, allowances, and discounts when calculating Adjusted Gross Sales. The document states that Adjusted Gross Sales means Gross Sales less certain items, including "the amount of all reasonable over-rings, allowances, discounts to customers, tips to employees (including discounts attributable to coupon sales, provided they have been included in Gross Sales) as determined by us in our sole judgment." This gives Beef O Bradys the authority to decide what is considered reasonable in these categories.
This determination has a direct financial impact on franchisees because it affects the Adjusted Gross Sales figure, which is used to calculate royalty payments and marketing contributions. If Beef O Bradys deems the franchisee's over-rings, allowances, and discounts to be excessive compared to the system-wide average, they can require the franchisee to increase their Adjusted Gross Sales by an amount Beef O Bradys determines.
This clause gives Beef O Bradys significant control over a franchisee's reported revenue for royalty calculation purposes. A prospective franchisee should carefully consider this provision and discuss with Beef O Bradys what constitutes "reasonable" over-rings, allowances, and discounts. Understanding the benchmarks and system-wide averages Beef O Bradys uses for comparison is crucial to avoid potential disputes and unexpected increases to Adjusted Gross Sales.