Does the financial performance representation for Chocolate Fish Coffee reflect the costs of sales?
Chocolate_Fish_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
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- The financial performance representation does not reflect the costs of sales, operating expenses, or other costs or expenses that must be deducted from the gross revenue or gross sales figures to obtain your net income or profit. You should conduct an independent investigation of the costs and expenses you will incur in operating your Chocolate Fish Coffee Roasters business. Franchisees or former franchisees, listed in Item 20 of this Franchise Disclosure Document, may be one source of this information.
Source: Item 19 — FINANCIAL PERFORMANCE REPRESENTATIONS (FDD pages 37–38)
What This Means (2024 FDD)
According to Chocolate Fish Coffee's 2024 Franchise Disclosure Document, the financial performance representation does not reflect the costs of sales. The Item 19 notes explicitly state that the financial performance representation does not include costs of sales, operating expenses, or other costs that must be deducted to determine net income or profit.
This means that the gross sales figures of $850,850.75, $531,854.48, and $828,545.45 for the three company-owned locations do not account for expenses such as inventory, labor, rent, and utilities. A prospective franchisee needs to consider these costs, along with estimated royalty fees (6%) and brand fund contributions (1%), to understand the potential profitability of a Chocolate Fish Coffee franchise.
The FDD advises potential franchisees to conduct their own independent investigation of costs and expenses. It suggests consulting current or former franchisees listed in Item 20 as a source of information. This is a standard practice in franchising, as financial performance representations often present gross sales figures, and it is up to the franchisee to determine net profitability by estimating and deducting all relevant expenses.