What is excluded from the definition of 'Gross Revenues' for a Big Apple Bagels franchise?
Big_Apple_Bagels Franchise · 2025 FDDAnswer from 2025 FDD Document
As used in this Agreement, the term "Gross Revenues" shall mean the entire amount of all gross sales and business receipts, including direct or indirect barter transactions, catering accounts, proceeds of business interruption insurance policies, wholesale accounts (both on and off premises) from the operation of the Store, through or by means of the business conducted in connection therewith, whether for cash or credit. It does not include: (1) sales, use, or service taxes collected from customers and paid to the appropriate taxing authority; and (2) any bona fide customer refunds and approved rebates, discounts and allowances. Franchisee agrees that Franchisee's POS (Point-of-Sale) System may be polled by Franchisor. Franchisee must make payments by electronic bank draft. Gross Revenues are based on retail prices (unless the purchaser has an arrangement for wholesale purchases, in which event Gross Revenues are based on wholesale prices), subject only to the exclusions noted in (1) and (2) of this paragraph. The inclusion in or exclusion from Gross Revenues of any fees paid by Franchisees to Third Party Delivery Services will be determined by BAB and published in BAB's Operations Manual or as promulgated in a Policy Statement issued by BAB.
Source: Item 22 — CONTRACTS (FDD pages 86–87)
What This Means (2025 FDD)
According to Big Apple Bagels' 2025 Franchise Disclosure Document, the definition of 'Gross Revenues' excludes specific items when calculating royalty fees. Gross Revenues encompass all gross sales and business receipts, including barter transactions, catering accounts, business interruption insurance proceeds, and wholesale accounts. However, the following are excluded from the calculation of Gross Revenues: sales, use, or service taxes collected from customers and remitted to the appropriate taxing authority, and any bona fide customer refunds, approved rebates, discounts, and allowances.
For a Big Apple Bagels franchisee, this definition is important because the royalty fee, which is five percent (5%) of Gross Revenues, is calculated based on this amount. By excluding taxes collected and customer refunds, the franchisee does not pay a royalty on these amounts, which reduces the overall royalty expense. Additionally, for the purposes of calculating contributions to the Marketing Fund, receipts from wholesale accounts are excluded from Gross Revenues.
The inclusion or exclusion of fees paid to Third Party Delivery Services in Gross Revenues is determined by Big Apple Bagels and communicated in their Operations Manual or a Policy Statement. This means that a franchisee's royalty and marketing fund contributions could vary depending on Big Apple Bagels's policy regarding these delivery services, such as GrubHub, DoorDash, UberEats, and ezCater. Franchisees should stay informed about these policy changes to accurately calculate and report their Gross Revenues.