What sales are excluded from the 'Gross Sales' calculation for a Bombs Away franchise?
Bombs_Away Franchise · 2024 FDDAnswer from 2024 FDD Document
"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).
Source: Item 22 — CONTRACTS (FDD pages 35–36)
What This Means (2024 FDD)
According to Bombs Away's 2024 Franchise Disclosure Document, the calculation of "Gross Sales" for royalty purposes excludes certain items. Specifically, the gross sales calculation does not include bona fide refunds to customers, sales taxes collected by the franchisee, sales of used equipment not in the ordinary course of business, and sales of prepaid cards or similar products. However, the redemption of any such prepaid card or product will be included in Gross Sales.
This definition of gross sales is important because the franchisee's royalty fees and marketing fund contributions are based on a percentage of gross sales. By excluding these items, Bombs Away aims to ensure that franchisees are not paying royalties on revenue that does not directly contribute to their profits, such as sales tax collected on behalf of the government or refunds issued to customers.
It is important for prospective franchisees to understand exactly how "Gross Sales" is defined, as this figure directly impacts the amount of royalties and other fees they will owe to Bombs Away. Franchisees should pay close attention to what is included and excluded from the calculation to accurately report their sales and avoid any discrepancies or penalties.