Are sales taxes excluded from the 'Gross Sales' calculation for a Carbones Pizzeria franchise?
Carbones_Pizzeria Franchise · 2025 FDDAnswer from 2025 FDD Document
- c. Gross Sales. The term "Gross Sales" shall mean the total amount of revenues, income, receipts and other amounts received from all business activities taking place by or through the Restaurant, and all other services and products, if any, sold under the Names and Marks, or otherwise, including amounts received for catering or for food and beverages
sold from a food truck or other vehicle. There shall be excluded from "Gross Sales" amounts collected and remitted by Franchisee to any governmental taxing authority in satisfaction of sales or occupation taxes, non-food vending machine sales discounts and amounts received from alcohol sales.
Source: Item 23 — RECEIPTS (FDD pages 30–116)
What This Means (2025 FDD)
According to Carbones Pizzeria's 2025 Franchise Disclosure Document, the calculation of "Gross Sales" excludes amounts collected and remitted to governmental taxing authorities for sales or occupation taxes. Gross Sales also exclude non-food vending machine sales discounts and amounts received from alcohol sales.
This definition of Gross Sales is important because Carbones Pizzeria franchisees pay royalties and advertising fees based on a percentage of Gross Sales. The royalty structure is tiered: 4% of Gross Sales on the initial $1,000,000 in Gross Sales per calendar year, then 3% of Gross Sales on the next $1,000,000 per calendar year, and finally 2% of Gross Sales over $2,000,000 in such calendar year. Franchisees also pay an Advertising Fee of 1% of monthly Gross Sales, although this fee is not due on Gross Sales exceeding $2,000,000 in any calendar year.
By excluding sales taxes from the Gross Sales calculation, Carbones Pizzeria reduces the royalty and advertising fees franchisees must pay. This exclusion can significantly impact a franchisee's profitability, especially in areas with high sales tax rates. Franchisees should understand how Gross Sales are calculated, as this directly affects their financial obligations to the franchisor.