Are sales of prepaid cards included in the 'Gross Sales' calculation for a Chocolate Bash franchise?
Chocolate_Bash Franchise · 2024 FDDAnswer from 2024 FDD Document
- "Gross Sales" means the total dollar amount of all sales generated through the Business for a given period, including, but not limited to, payment for any services or products sold by Franchisee, whether for cash or credit. Gross Sales does not include (i) bona fide refunds to customers, (ii) sales taxes collected by Franchisee, (iii) sales of used equipment not in the ordinary course of business, or (iv) sales of prepaid cards or similar products (but the redemption of any such card or product will be included in Gross Sales).
Source: Item 22 — CONTRACTS (FDD pages 38–39)
What This Means (2024 FDD)
According to Chocolate Bash's 2024 Franchise Disclosure Document, the initial sale of prepaid cards is excluded from the calculation of Gross Sales. However, when customers redeem these prepaid cards for products or services at the Chocolate Bash franchise, the redemption value is included in Gross Sales.
This distinction is important for franchisees because Gross Sales figures are often used to calculate royalty payments and other fees owed to Chocolate Bash. By excluding the initial sale of prepaid cards, the franchisee doesn't pay a percentage of that sale until the card is actually used at the store. This can help manage cash flow and ensure that royalties are based on actual product or service sales rather than the anticipation of future sales.
Franchisees should keep accurate records of both prepaid card sales and redemptions to ensure proper calculation of Gross Sales. This policy is fairly standard in the franchise industry, as it aligns royalty payments with actual revenue generated from goods and services provided.