Are revenues from the sale of Beggars Pizza gift cards included in Gross Sales?
Beggars_Pizza Franchise · 2025 FDDAnswer from 2025 FDD Document
- 4.3 Gross Sales; Accounting Period. "Gross Sales" means all revenues generated from sales of all products and services conducted at, from, or with respect to the Restaurant whether such sales are evidenced by cash, check, credit, charge, account, gift cards, loyalty cards, barter, or exchange, and any proceeds from business interruption insurance coverage.
Gross Sales will not include the sale of products or services for which refunds have been made in good faith to customers, the sale of equipment or furnishings used in the operation of the Restaurant, revenue derived from the sale or issuance of System gift or loyalty cards (although revenue derived from the sale of products and services paid for with gift or loyalty cards is included), any reduction in revenue due to discounts or coupon sales, any sales taxes or other taxes collected from customers by Franchisee and paid directly to the appropriate taxing authority. "Accounting Period" means every seven (7) days beginning on Monday and ending on Sunday.
Source: Item 22 — CONTRACTS (FDD page 39)
What This Means (2025 FDD)
According to Beggars Pizza's 2025 Franchise Disclosure Document, the revenues from the initial sale of gift cards are not included in the calculation of Gross Sales. However, when those gift cards are redeemed for products and services at a Beggars Pizza restaurant, the revenue from those sales is included in Gross Sales.
This distinction is important for prospective franchisees because Gross Sales is the basis for calculating royalty fees. Beggars Pizza franchisees pay a royalty fee equal to the greater of 5% of Gross Sales or $500 for each accounting period. If applicable law prohibits a franchisee from paying a percentage of revenue from the sale of alcoholic beverages, the royalty fee is the greater of 6.5% of Gross Sales (excluding revenues from the sale of alcoholic beverages) or $500 for each accounting period.
Therefore, a Beggars Pizza franchisee does not pay royalties on the initial sale of gift cards, but will pay royalties when customers use those gift cards to purchase menu items or other products. This is a common practice in the franchise industry, as it avoids double-taxing the revenue. The initial sale is essentially the movement of money and not a true sale until the card is redeemed for goods or services.