What revenues are specifically excluded from the 'Net Sales' calculation for a Carvel Shoppe?

According to Carvel's 2025 Franchise Disclosure Document, the calculation of "Net Sales" for a Carvel Shoppe excludes several specific revenue streams and deductions. Understanding these exclusions is crucial for prospective franchisees as it directly impacts the reported financial performance and royalty calculations.

Specifically, the following items are not included in Carvel's Net Sales calculation: (a) the initial sales or reloading of gift cards, (b) discounts, (c) the sale of food or merchandise for which refunds have been made in good faith to customers, (d) the discounted portion of employee meals, (e) sales, meals, use or excise tax 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 by you to a governmental authority, (f) the sale of equipment used in the operation of the Shoppe, or (g) tips. These exclusions provide a more accurate representation of the revenue generated from the core business operations of the Carvel Shoppe.

For a prospective Carvel franchisee, this definition of Net Sales is important for several reasons. First, it clarifies the base upon which royalties are calculated, ensuring that franchisees are not paying royalties on revenues that are pass-through in nature, such as sales taxes. Second, it provides a consistent method for reporting sales across all franchised locations, allowing for more accurate comparisons of financial performance. Finally, understanding these exclusions helps franchisees to better manage their pricing strategies, employee benefits, and customer service policies, as these factors directly impact the Net Sales figure.