How is Net Sales defined for the purpose of calculating the Royalty fee for a Checkers franchise?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
Source: Item 6 — OTHER FEES (FDD pages 21–30)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, Net Sales is a crucial figure, as it is the base used to calculate royalty fees and advertising contributions. For Checkers franchises, "Net Sales" encompasses all revenue generated from the restaurant's operations. This includes all sales amounts from food, beverages, other products, and services rendered at the premises or in connection with the franchised restaurant. It also includes all monies derived from sales at or away from the restaurant, regardless of whether the payment is made via cash, check, credit or debit card, barter exchange, trade credit, or other credit transactions.
However, the definition of Net Sales does allow for some exclusions and reductions. Specifically, Checkers franchisees can exclude all federal, state, or municipal sales, use, or service taxes collected from customers and paid to the appropriate taxing authority. Additionally, the Net Sales figure can be reduced by the amount of any documented refunds, credits, allowances, adjustments, promotional discounts, and charge-backs that the franchised restaurant provides to customers in good faith.
For a prospective Checkers franchisee, understanding this definition is essential for accurate financial reporting and royalty calculations. It is important to maintain thorough records of all sales, taxes collected, and customer refunds or discounts to ensure compliance with the franchise agreement and to accurately calculate royalty payments. Note that the royalty is generally 4% of Net Sales, but can be 2% for restaurants operating from a Non-Traditional Site.