For Carvel, what is included in the definition of 'Net Sales'?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
C. Net Sales. "Net Sales" means all revenues generated by your Franchised Business or conducted from or with respect to the Franchised Business, whether the sales are evidenced by cash, check, credit, charge, account, barter or exchange. Net Sales includes monies, gift card redemptions, or credit generated by or received from (i) the sale of Approved Products or tangible property of every kind and nature, promotional or otherwise, anywhere and (ii) services performed from, at, or in connection with the Franchised Business, including (x) offpremises services (such as catering and delivery), (y) on-premises services (such as games, gambling machines, or third-party advertising within the Franchised Business), or (z) any other services or activities that use either the System, the Marks, or products that are the same as or similar to the Approved Products. The foregoing list is not intended to provide approval for such activities, which may be conducted only if approved. Unless we specify otherwise in writing, Net Sales shall include all ancillary charges or fees, including delivery fees and other service charges,
Source: Item 23 — Receipts (FDD pages 100–353)
What This Means (2025 FDD)
According to Carvel's 2025 Franchise Disclosure Document, "Net Sales" encompasses all revenues generated by the franchised business, regardless of the form of payment, including cash, check, credit, charge, account, barter, or exchange. This broad definition includes monies, gift card redemptions, and credit received from the sale of approved products or tangible property, as well as services performed in connection with the franchised business. These services include off-premises activities like catering and delivery, on-premises services such as games or third-party advertising, and any other activities that utilize the Carvel system, trademarks, or products similar to the approved products.
Furthermore, unless otherwise specified in writing by Carvel, "Net Sales" includes all ancillary charges or fees, such as delivery fees and other service charges. This comprehensive definition is crucial because the royalty fee and advertising contribution are calculated as percentages of Net Sales.
For a prospective Carvel franchisee, understanding this definition is essential for accurate financial reporting and calculation of royalty and advertising fees. Franchisees must meticulously track all revenue streams, including those from various services and ancillary charges, to ensure compliance with the franchise agreement and avoid potential discrepancies during audits. Underreporting Net Sales by more than 2% can lead to additional expenses, including reimbursement for audit costs and potential penalties.