What is considered 'Gross Sales' for the purpose of calculating royalties for a Carbones Pizzeria franchise?
Carbones_Pizzeria Franchise · 2025 FDDAnswer from 2025 FDD Document
wenty-five Thousand Dollars ($25,000.00) (the "Franchise Fee"), payable in full upon the execution of this Agreement. It is expressly understood and agreed by the parties that the Franchise Fee is and shall be fully earned by Franchisor upon the signing of this Agreement and no part of the Franchise Fee shall be refunded to Franchisee for any reason whatsoever.
- b. In addition to the Franchise Fee, Franchisee shall pay to the Franchisor during the term of this Agreement, a "Royalty" as follows: (a) 4% of total Gross Sales on the initial $1,000,000 in Gross Sales per calendar year, at which point the Royalty is reduced to (b) 3% of Gross Sales on the next $1,000,000 per calendar year, at which point the Royalty is reduced to (c) 2% of Gross Sales over $2,000,000 in such calendar year.
- c. The Royalty shall be payable monthly on the 10th day following the end of each month. Franchisor shall aggregate its calculation of Gross Sales to include all of Franchisee's Carbone's Pizzeria restaurants during each month. Notwithstanding the foregoing, sales of alcohol by Franchisee at a facility which is a "fully licensed liquor establishment" licensed to sell alcohol shall not be included in the calculation of Gross Sales. Remittance of the Royalty shall be accompanied by reports of Gross Sales and other data upon forms provided by Franchisor from time-to-time. Any due date for payment on a non-business day shall be due the immediately following business day.
- d. Franchisor may collect all amounts due under this Agreement via electronic funds transfer/debit. Franchisee shall execute the Electronic Funds Transfer/Debit Authorization attached to this Agreement as Exhibit A.
Source: Item 23 — RECEIPTS (FDD pages 30–116)
What This Means (2025 FDD)
According to the 2025 Carbones Pizzeria Franchise Disclosure Document, the royalty fee is based on a percentage of Gross Sales. The franchisee pays a royalty as follows: 4% of total Gross Sales on the initial $1,000,000 in Gross Sales per calendar year, at which point the Royalty is reduced to 3% of Gross Sales on the next $1,000,000 per calendar year, at which point the Royalty is reduced to 2% of Gross Sales over $2,000,000 in such calendar year.
However, the calculation of Gross Sales does not include sales of alcohol by the franchisee if the facility is a "fully licensed liquor establishment" licensed to sell alcohol. The franchisee is required to submit reports of Gross Sales to Carbones Pizzeria along with their royalty payments.
Carbones Pizzeria also has the right to independently access the Restaurant's accounting and financial systems and data or any accounting or financial systems used or required by Franchisor for the Carbone System to determine Gross Sales and fees due to Franchisor under this Agreement, and Franchisee shall grant Franchisor access to all such accounting and financial systems and data. This access allows Carbones Pizzeria to verify the accuracy of reported sales and ensure proper royalty payments. If the franchisee fails to report Gross Sales, withholds access to accounting systems, or fails to pay amounts due, Carbones Pizzeria may debit the franchisee's account for 110% of the Royalty fees and Advertising Contributions last paid by Franchisee.