How are royalties assessed on gift cards for Burneys Sweets More?
Burneys_Sweets_More Franchise · 2025 FDDAnswer from 2025 FDD Document
Note 3. "Gross Sales" means the total of gross revenue that you derive from the operation of your Shop, including, but not limited to, all revenue from services rendered by your Shop and from the sale of products, whether from sales for cash or credit and regardless of the collection thereof, including sales made on a retail, wholesale, or any other basis. Gross Sales also includes any proceeds you receive from business interruption insurance. Gross Sales does not include tips, sales taxes or gift card redemptions, nor does it include sales to other franchisees and company-owned Shops. Royalties on gift cards are assessed when the gift card is sold. In the event you use a gross buying service such as Groupon or Living Social, gross sales shall include the total gross amount paid by the customer, whether or not such amount is ultimately paid to you or the group buying service.
Source: Item 6 — OTHER FEES (FDD pages 11–17)
What This Means (2025 FDD)
According to Burneys Sweets More's 2025 Franchise Disclosure Document, royalties on gift cards are assessed when the gift card is sold. This means that Burneys Sweets More franchisees must pay a percentage of the gift card's value as a royalty to the franchisor at the time of the sale, rather than when the gift card is redeemed by a customer.
This policy has implications for cash flow management. The franchisee must remit royalties on the full value of the gift card immediately upon sale, even though the revenue from the goods or services purchased with the gift card will be realized later, upon redemption. This could create a timing difference between when the royalty payment is due and when the corresponding revenue is earned.
It is important to note that the Gross Sales definition specifically excludes gift card redemptions. This clarifies that franchisees are not charged royalties twice – once at the point of sale and again when the gift card is used for a purchase. This is a common practice in the franchise industry to avoid double-dipping on royalty fees.
Prospective Burneys Sweets More franchisees should carefully consider this policy and factor it into their financial projections. Understanding the timing of royalty payments on gift cards is crucial for accurate financial planning and ensuring sufficient cash flow to meet royalty obligations.