When calculating 'Net Sales' for a Checkersrallys franchise, what revenues are included and what deductions are permitted?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
"Net Sales" – 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 the 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 22 — CONTRACTS (FDD pages 91–92)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, "Net Sales" is a crucial figure used to calculate royalty fees and advertising expenses. For a Checkersrallys franchise, Net Sales include all revenue derived from operating the franchised restaurant. This encompasses all sales amounts from food, beverages, and other products sold, as well as services rendered at the premises or in connection with the restaurant. It also includes all monies derived from sales at or away from the restaurant, regardless of the payment method, such as cash, check, credit or debit card, barter exchange, trade credit, or other credit transactions.
However, the calculation of Net Sales does allow for certain exclusions and deductions. Specifically, Checkersrallys 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 gross revenue 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.
Understanding what constitutes Net Sales is critical for a Checkersrallys franchisee because it directly impacts the royalty fees owed to the company, which are 4% of Net Sales, and the amount required to be spent on advertising and promoting the Franchised Restaurant, which is a minimum of 4.5% of Net Sales during each fiscal quarter. Accurate calculation and reporting of Net Sales are essential for compliance with the franchise agreement and for the financial health of the franchise.