Are sales of prepaid cards included in Better Blend's Adjusted Gross Sales?
Better_Blend Franchise · 2024 FDDAnswer from 2024 FDD Document
- "Adjusted Gross Sales" is defined in our franchise agreement as the total dollar amount of all sales generated through your business for a given period, including, but not limited to, payment for any services or products sold by you, whether for cash or credit. It also includes any proceeds you receive from business interruption insurance. Adjusted Gross Sales does not include (i) coupons, discounts, and bona fide refunds to customers, (ii) sales taxes collected, or (iii) sales of prepaid cards or similar products (but the redemption of any such card or product will be included in Adjusted Gross Sales).
Source: Item 6 — OTHER FEES (FDD pages 11–15)
What This Means (2024 FDD)
According to Better Blend's 2024 Franchise Disclosure Document, the initial sale of prepaid cards is not included in the calculation of Adjusted Gross Sales. However, the FDD specifies that when customers redeem these prepaid cards for products or services, the redemption value is included in Adjusted Gross Sales. This distinction is important for franchisees because Adjusted Gross Sales is the basis for calculating royalty fees and marketing fund contributions.
For a Better Blend franchisee, this means that the franchisee will not pay royalty fees or marketing contributions on the initial sale of a prepaid card. However, when the customer uses the card to purchase a smoothie or other product, that transaction will be included in the Adjusted Gross Sales calculation, and the franchisee will owe the associated fees. This deferred inclusion in Adjusted Gross Sales could impact cash flow and financial planning for the franchisee.
This approach to prepaid cards is fairly common in the franchise industry. Franchisors often exclude the initial sale of prepaid cards from gross sales calculations to avoid double-counting revenue. By including only the redemption value, the franchisor ensures that fees are based on actual sales of goods and services. Franchisees should carefully track both the sale and redemption of prepaid cards to accurately report Adjusted Gross Sales and avoid potential discrepancies or penalties.