How does Chick Fil A account for changes in tax rates and tax laws?
Chick_Fil_A Franchise · 2025 FDDAnswer from 2025 FDD Document
- (c) Notwithstanding anything to the contrary in the DK Lease, as between Chick-fil-A and the Operator, all Gross Receipts generated as a result of sales from the Delivery Kitchen Unit, will be deemed to be Gross Receipts of the Operator, and the Operator (and not Chick-fil-A) will have sole responsibility for payment of any sales, use, or excise tax, any apportioned personal property tax or any other tax arising from the Delivery Kitchen Unit, the sale and distribution of Products and promotional items, the lease of the Equipment and/or the presence of the Equipment at the Delivery Kitchen Unit, directly or through Licensor.
The parties acknowledge and agree that sales, use, or similar taxes may be due and payable even when Products and promotional items are given away and not sold.
Source: Item 23 — Receipts (FDD pages 103–600)
What This Means (2025 FDD)
Based on the 2025 Chick Fil A Franchise Disclosure Document, the operator (franchisee) is responsible for the payment of taxes related to the Delivery Kitchen Unit. Chick-fil-A has a system in place to manage the collection and accounting of the Operator's Gross Receipts, which includes facilitating the payment of rent, equipment rental, insurance premiums, advertising contributions, and other fees. Chick-fil-A may adjust this system as needed to ensure accurate calculations and payments.
Specifically, the Chick Fil A operator is solely responsible for the payment of any sales, use, or excise tax, any apportioned personal property tax or any other tax arising from the Delivery Kitchen Unit, the sale and distribution of Products and promotional items, the lease of the Equipment and/or the presence of the Equipment at the Delivery Kitchen Unit, directly or through Licensor. The FDD clarifies that these taxes may be due even when products and promotional items are given away and not sold.
If Chick Fil A pays any charge, fee, cost, or expense on behalf of the operator, the operator must reimburse Chick-fil-A immediately upon receiving written notice. This reimbursement can be done either by issuing a check to Chick-fil-A or by approving adjustments to the amounts owed between the operator and Chick-fil-A under the Franchise Agreement. If the operator fails to meet their obligations, Chick-fil-A has the option to fulfill those obligations and charge the operator for the costs incurred, along with interest. Interest on late payments is calculated at the highest rate allowed by law, or 1.25% per month if no maximum rate is specified, compounded monthly.
Chick Fil A's management of receipts and payments, along with the operator's responsibility for taxes, ensures that all financial obligations are met. The interest charged on late payments serves as an incentive for operators to stay current with their financial responsibilities. This system allows Chick-fil-A to maintain financial control and ensure compliance with tax laws, while also providing a mechanism for addressing any failures on the part of the operator.