What costs are included in 'Cost of Goods Sold' (COGS) for a Chop5 Salad Kitchen restaurant?
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, beverages, and paper products. COGS is a key metric for understanding the direct expenses related to the products Chop5 Salad Kitchen sells. It is important to note that these costs were used to calculate the financial performance representation in Item 19 of the FDD.
However, the 2024 FDD explicitly states what is NOT included in COGS. These exclusions are fixed costs, overhead costs, labor expenses, marketing expenses, and what the document refers to as 'Excluded Expenses'. Excluded Expenses are defined as interest paid on debt, taxes, depreciation, amortization expenses, 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.
Understanding what comprises COGS, and equally important, what is excluded, is crucial for prospective Chop5 Salad Kitchen franchisees. This knowledge allows for a more accurate assessment of the financial performance data presented in Item 19 and helps in developing realistic financial projections for a franchise location. By understanding these inclusions and exclusions, a franchisee can better manage their restaurant's expenses and profitability.