For Bombs Away, are discounts included in the calculation of 'Gross Sales'?
Bombs_Away Franchise · 2024 FDDAnswer from 2024 FDD Document
as, techniques, designs, layouts, operating procedures, customer data, information and know-how.
- "Gross Sales" means the total dollar amount of all sales generated through the Business for a given period, including, but not limited to, payment for any services or products sold by Franchisee, whether for cash or credit. Gross Sales does not include (i) bona fide refunds to customers, (ii) sales taxes collected by Franchisee, (iii) sales of used equipment not in the ordinary course of
business, or (iv) sales of prepaid cards or similar products (but the redemption of any such card or product will be included in Gross Sales).
"Input" means any goods, services, supplies, fixtures, equipment, inventory, computer hardware and software, real estate, or comparable items related to establishing or operating the Business.
Source: Item 19 — FINANCIAL PERFORMANCE REPRESENTATIONS (FDD pages 31–33)
What This Means (2024 FDD)
According to Bombs Away's 2024 Franchise Disclosure Document, discounts are explicitly excluded from the calculation of Gross Sales for the purpose of determining royalty and marketing fees. Gross Sales is defined as the total dollar amount of all sales generated through the Business for a given period, including payment for any services or products sold by Franchisee, whether for cash or credit. However, Gross Sales does not include bona fide refunds to customers, sales taxes collected by Franchisee, sales of used equipment not in the ordinary course of business, or sales of prepaid cards or similar products (though the redemption of such cards is included).
This definition is important for Bombs Away franchisees because royalty fees and marketing fund contributions are typically calculated as a percentage of Gross Sales. By excluding discounts from the Gross Sales calculation, Bombs Away ensures that franchisees are not paying royalties on revenue they did not actually collect. This practice is fairly standard in the franchise industry, as it aligns the royalty payments with the actual revenue generated by the franchise.
In the context of the financial performance representation provided in Item 19, the document specifies that "Gross Sales" means total of all collected revenue in a period, not including discounts, taxes, tips/gratuity or voids. This reinforces the exclusion of discounts from the Gross Sales figure used for financial reporting and royalty calculations. Franchisees should be aware of this definition and ensure their accounting practices align with it to accurately report Gross Sales and calculate their royalty and marketing fund obligations to Bombs Away.