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

According to Carvel's 2025 Franchise Disclosure Document, 'Net Sales' for the purposes of calculating fees and other obligations do not include several items. Specifically, the following are excluded from the calculation of Net Sales: the initial sales or reloading of gift cards, any discounts offered, sales of food or merchandise for which refunds have been made to customers in good faith, and the discounted portion of employee meals.

Additionally, Net Sales will not include sales, meals, use, or excise taxes imposed by a governmental authority directly on sales and collected from customers, provided that the amount for the tax is added to the selling price or absorbed therein and is actually paid to a governmental authority. The sale of equipment used in the operation of the Carvel Shoppe is also excluded from Net Sales. Finally, tips received by employees are not included in the calculation of Net Sales.

These exclusions are important for a prospective Carvel franchisee to understand because Net Sales is often used as the basis for calculating royalty fees, advertising fees, and other financial obligations to Carvel. By excluding these items from Net Sales, the franchisee's financial obligations may be reduced, as these exclusions effectively lower the base revenue upon which these fees are calculated. Franchisees should carefully review these exclusions and ensure accurate reporting to avoid any disputes with Carvel.