What is excluded from Net Sales calculations for a Buff City Soap franchise?
Buff_City_Soap Franchise · 2025 FDDAnswer from 2025 FDD Document
"Net Sales" means the total selling price of all services and products and all income of every kind and nature related to your BCS Makery, whether for cash, cash equivalents, or credit, and regardless of collection in the case of credit.
Proceeds from the sale of coupons, gift cards, gift certificates or vouchers shall be included in Net Sales when and at the Makery from which the coupons, gift cards, gift certificates or vouchers are eventually redeemed.
Net Sales exclude the following: complimentary products and services (provided that the aggregate amount of such products and services does not exceed 2% of Net Sales for the applicable week), tips and gratuities, and sums collected and actually paid by you for any sales or other excise tax imposed by any duly constituted government authority.
In the case of promotional discounts implemented by us at the BCS Makery, the amount actually paid by the guest after the discount, rather than the original amount, will be considered for purposes of the term Net Sales.
Net Sales also includes the proceeds of any business interruption insurance applicable to your BCS Makery.
Source: Item 5 — INITIAL FEES (FDD pages 15–23)
What This Means (2025 FDD)
According to Buff City Soap's 2025 Franchise Disclosure Document, the calculation of "Net Sales" for royalty fee purposes excludes specific items. These exclusions directly impact the franchisee's royalty obligations, as the royalty fee is 6% of Net Sales.
Specifically, Net Sales do not include complimentary products and services, provided that these do not exceed 2% of Net Sales for the applicable week. This allowance provides some flexibility for promotional activities or customer service gestures. Also excluded are tips and gratuities, ensuring that these amounts, intended for staff, are not subject to royalty fees. Sums collected and actually paid by the franchisee for any sales or other excise tax imposed by a government authority are also excluded, preventing the franchisee from paying royalties on tax revenue.
Furthermore, in the case of promotional discounts implemented by Buff City Soap, the amount actually paid by the customer after the discount is considered for Net Sales, rather than the original price. However, Net Sales do include proceeds from business interruption insurance applicable to the franchisee's BCS Makery. Understanding these inclusions and exclusions is crucial for a prospective franchisee to accurately forecast revenue and royalty obligations.