How is 'Net Sales' defined for the purpose of calculating royalty fees for a Checkersrallys franchise?
Checkersrallys 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.
Source: Item 6 — OTHER FEES (FDD pages 21–29)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, "Net Sales" is a crucial figure for calculating royalty fees and other contributions. Checkersrallys defines "Net Sales" as all revenue derived from operating the franchised restaurant. This includes all sales amounts from food, beverages, other products, and services rendered at the premises or otherwise connected with the restaurant. The revenue 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, it excludes 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 is 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 Checkersrallys franchisee, understanding this definition is critical because the royalty fee, as well as contributions to the National Production Fund and local advertising cooperatives, are calculated as a percentage of Net Sales. Accurately tracking and reporting all sales, exclusions, and deductions is essential for compliance with the franchise agreement and for correctly calculating these ongoing fees. Franchisees should pay close attention to the specific types of deductions allowed to ensure they are properly documented and reported to Checkersrallys.