Are sales or excise taxes included in the calculation of Gross Sales for a Browns Chicken franchise?
Browns_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
The term "Gross Sales," as used in this Agreement, shall mean and include the aggregate actual gross selling prices of all food, beverages, and other products and services (including without limitation entertainment/video gaming) sold and/or performed and/or offered by or for Franchisee or the Store, in, upon or from the Premises, or through or by means of the business conducted therein or otherwise by the Store or Franchisee, including direct or indirect barter transactions, catering services, proceeds of business interruption insurance policies, whether for cash or for credit, provided, that in determining the amount of Gross Sales, there shall be excluded: (1) sales, use, or excise taxes passed on as such to the customer and paid to the
appropriate taxing authorities
Source: Item 22 — Contracts (FDD page 43)
What This Means (2025 FDD)
According to Browns Chicken's 2025 Franchise Disclosure Document, gross sales do not include sales or excise taxes. The document specifies that the term "Gross Sales" means the total amount of dollars of the actual sales price for all sales of food and beverages. However, any sums collected and paid out for sales or excise taxes imposed by a governmental authority are excluded from gross sales.
This definition of gross sales is important because Browns Chicken calculates its royalty fee based on a percentage of gross sales. The standard royalty fee is five percent (5%) of the Gross Sales of the Store, with a different rate for video gaming revenue. By excluding sales and excise taxes from the gross sales calculation, Browns Chicken ensures that franchisees are not paying royalties on money that is simply being passed through to taxing authorities.
Franchisees must maintain accurate records of all sales and revenues, including excise tax reports and state sales tax reports. These records must be kept for at least three years and are subject to inspection and audit by Browns Chicken. This ensures transparency and allows Browns Chicken to verify the accuracy of reported gross sales and tax exclusions.