What costs are included in 'Cost of Goods Sold' (COGS) for a Chop5 Salad Kitchen?
Chop5_Salad_Kitchen Franchise · 2024 FDDAnswer from 2024 FDD Document
- "Cost of Goods Sold" or "COGS" includes variable costs that are directly associated with the provision and delivery of goods and services, and which includes costs of food and beverage as well as paper costs.
COGS do not include: (a) fixed costs; (b) overhead costs; (c) Labor Expenses, (d) Marketing Expenses or (e) Excluded Expenses.
- "Excluded Expenses" means interest paid on debt, taxes, depreciation, amortization expenses and certain other expenses incurred by Qualifying Restaurants that are not accounted for in this FPR, including: 3rd party delivery charges; kitchen expenses (supplies, smallwares, etc.); payroll processing/service fees; employee uniforms; food license fees; and any other miscellaneous expenses not included in COGS, Labor Expenses or Marketing Expenses.
Source: Item 19 — FINANCIAL PERFORMANCE REPRESENTATIONS (FDD pages 45–48)
What This Means (2024 FDD)
According to Chop5 Salad Kitchen's 2024 Franchise Disclosure Document, Cost of Goods Sold (COGS) includes variable costs directly associated with providing and delivering goods and services. Specifically, this includes the costs of food and beverage, as well as paper costs. Understanding what comprises COGS is crucial for a prospective franchisee to accurately project their potential profitability. COGS is then subtracted from Gross Sales to calculate Gross Profit.
However, the FDD also clarifies what is NOT included in COGS. Fixed costs, overhead costs, labor expenses, and marketing expenses are all excluded from COGS. Additionally, 'Excluded Expenses' such as interest on debt, taxes, depreciation, amortization, third-party delivery charges, kitchen supplies, payroll processing fees, employee uniforms, food license fees, and other miscellaneous expenses are not included in COGS.
For a prospective Chop5 Salad Kitchen franchisee, this definition is important for several reasons. Accurately categorizing expenses is essential for financial planning and management. By understanding which costs are included in COGS versus other categories like Labor Expenses or Marketing Expenses, a franchisee can better analyze their operational efficiency and profitability. The Item 19 table shows that for the company-owned restaurant, Cost of Goods Sold was $542,300, representing 30.4% of Gross Sales of $1,783,883. This provides a benchmark, though individual results may vary.