What is the definition of 'Net Sales' for a Carvel franchise?

According to Carvel's 2025 Franchise Disclosure Document, "Net Sales" encompasses all revenues generated by the franchised business, regardless of the form of payment. This includes cash, checks, credit, charge, account, barter, or exchange. Net Sales also includes monies, gift card redemptions, or credit generated or received from the sale of approved products or tangible property, as well as services performed at or in connection with the franchised business. These services include off-premises activities like catering and delivery, and on-premises services such as games, gambling machines, or third-party advertising.

For a prospective Carvel franchisee, this definition is crucial because it forms the basis for calculating royalty fees and advertising contributions. The royalty fee is 6% of Net Sales, and the advertising contribution, combined with the local marketing obligation, cannot exceed 5% of Net Sales. Therefore, understanding what constitutes Net Sales is essential for accurately calculating these ongoing fees.

It is important to note that while "Net Sales" is used for calculating royalty and advertising fees, "Gross Sales" has a different meaning for reporting purposes. Gross Sales includes Net Sales plus any discounts from redemptions of coupons and other reductions made to calculate Net Sales. This distinction highlights the importance of maintaining accurate records and understanding the specific definitions provided in the Franchise Agreement to ensure compliance and accurate financial reporting to Carvel.