How does the definition of 'Net Sales' in Item 6 relate to the franchisee's ability to build a sustainable and profitable business?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
NOTE 2: The term "Net Sales" means all revenue derived from operating the Franchised Restaurant, including the aggregate of all sales amounts from food, beverages and other products sold and services rendered at the Premises or otherwise rendered in connection with your Franchised Restaurant, and all monies derived from sales at or away from the Franchised Restaurant, whether from cash, check, credit or debit card, barter exchange, trade credit, or other credit transactions, but: (1) excluding all federal, state or municipal sales, use or service taxes collected from customers and paid to the appropriate taxing authority; and (2) reduced by the amount of any documented refunds, credits, allowances, adjustments, promotional discounts, and charge-backs the Franchised Restaurant provides to customers in good faith.
What This Means (2025 FDD)
According to Checkers's 2025 Franchise Disclosure Document, the definition of 'Net Sales' in Item 6 is crucial for a franchisee's ability to assess and build a sustainable and profitable business. Net Sales represents the total revenue a Checkers restaurant generates, but it's not simply the gross sales figure. It includes all revenue from food, beverages, and other products and services, whether sold at the restaurant or elsewhere, and from any form of payment (cash, credit, etc.).
However, the definition also specifies important exclusions and deductions. Specifically, Net Sales excludes all sales, use, or service taxes collected from customers and remitted to the appropriate taxing authorities. It is also reduced by documented refunds, credits, allowances, adjustments, promotional discounts, and charge-backs provided to customers in good faith. This adjusted figure provides a more accurate representation of the actual revenue the Checkers franchisee retains.
Understanding this definition is vital because many key financial obligations, such as royalty fees and advertising fees, are calculated as a percentage of Net Sales. A clear and accurate understanding of what constitutes Net Sales ensures that these fees are calculated correctly, which directly impacts the franchisee's profitability. Moreover, the Net Sales figure is a key performance indicator that franchisees can use to track their restaurant's financial health, identify areas for improvement, and make informed business decisions to enhance sustainability and profitability. The 2025 FDD also uses Net Sales to calculate financial performance representations in Item 19, which can be used to estimate potential revenues.