For Carls Jr., what revenue is excluded from Gross Sales when calculating the royalty fee?

According to the 2025 Carls Jr. Franchise Disclosure Document, the royalty fee is calculated based on Gross Sales. Gross Sales includes all revenue from the sale of services and products, excluding Carls Jr. approved promotional items. It also includes all other income of every kind and nature related to the franchised restaurant, whether for cash or credit, and regardless of collection in the case of credit. Revenue from the sale of stored value gift cards or gift certificates is excluded, but revenue is included when gift certificates are redeemed or stored value gift cards are debited.

However, Gross Sales does not include sales taxes or other taxes collected from customers by the franchisee for transmittal to the appropriate taxing authority. This means that while the franchisee must remit a royalty fee based on nearly all income, they do not have to pay a royalty on the taxes they collect on behalf of the government.

For a prospective Carls Jr. franchisee, this definition of Gross Sales is important because it determines the base upon which the royalty fee is calculated. Understanding what is included and excluded from Gross Sales ensures accurate royalty payments and helps in forecasting revenue and expenses. Franchisees should pay close attention to the treatment of gift card sales and redemptions, as well as the handling of sales taxes, to ensure compliance with the franchise agreement.