Are customer refunds included in the Gross Sales calculation for a Chocolate Fish Coffee franchise?
Chocolate_Fish_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
Notes
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- "Gross Sales" is defined in our franchise agreement as the total dollar amount of all sales generated through your business for a given period, including, but not limited to, payment for any services or products sold by you, whether for cash or credit. Gross Sales does not include (i) bona fide refunds to customers, (ii) sales taxes collected, (iii) sale 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
Source: Item 6 — OTHER FEES (FDD pages 10–13)
What This Means (2024 FDD)
According to Chocolate Fish Coffee's 2024 Franchise Disclosure Document, the calculation of gross sales for royalty fee purposes does not include bona fide customer refunds. Gross sales is defined as the total dollar amount of all sales generated through your business for a given period, including, but not limited to, payment for any services or products sold by you, whether for cash or credit.
This means that Chocolate Fish Coffee franchisees do not have to pay royalty fees on the portion of sales that are later refunded to customers. This is a benefit to the franchisee, as it lowers the royalty fees owed to the franchisor.
Besides customer refunds, gross sales also excludes sales taxes collected, the sale of used equipment not in the ordinary course of business, and sales of prepaid cards or similar products. However, the redemption of any such card or product will be included in Gross Sales.