What is included in the calculation of 'Gross Profit' for a Chop5 Salad Kitchen?
Chop5_Salad_Kitchen Franchise · 2024 FDDAnswer from 2024 FDD Document
set forth in Item 19 of this Disclosure Document.
- "Franchised Restaurant" means any Restaurant that is owned by a franchisee.
- "Gross Profit" means the financial performance metric calculated as Gross Sales minus COGS.
- "Gross Sales" means total revenue from all goods and services sold less: (a) taxes; (b) customer refunds; (c) revenue from the sale of furniture, fixtures and equipment in the ordinary course of business; (d) the value of approved coupons, vouchers or similar items at the time of redemption; and (e) tips paid to and retained by staff members as a gratuity.
- "Imputed Fees & Costs" means the royalty fees, brand fund fees and Local Advertising Commitment (LAC) a Company-Owned Restaurant would have incurred if it was a Franchised Restaurant, less any amounts actually incurred by the Company-Owned Restaurant for these categories of fees and costs.
- "Labor Expenses" means and includes all Restaurant labor expense, including: manager salaries; hourly wages for shift managers and Restaurant employees; payroll taxes; and vacation pay for Restaurant employees.
- "Marketing Expenses" means all costs and expenses incurred for internal and external advertising, marketing and promotional activities, including expenses associated with incorporating the menu into the customer experience.
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, Gross Profit is a financial metric calculated by subtracting the Cost of Goods Sold (COGS) from Gross Sales. Gross Sales include total revenue from all goods and services sold, less taxes, customer refunds, revenue from the sale of furniture, fixtures, and equipment in the ordinary course of business, the value of approved coupons, vouchers or similar items at the time of redemption, and tips paid to and retained by staff members as a gratuity. COGS includes variable costs directly associated with providing and delivering goods and services, such as the costs of food, beverage, and paper products.
It is important to note what is not included in the Cost of Goods Sold (COGS) calculation for Chop5 Salad Kitchen. COGS does not include fixed costs, overhead costs, Labor Expenses, Marketing Expenses, or 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.
For a prospective Chop5 Salad Kitchen franchisee, understanding this calculation is crucial for assessing the potential profitability of the franchise. By carefully tracking Gross Sales and COGS, while keeping in mind the exclusions, franchisees can gain a clear picture of their Gross Profit. This figure serves as a foundational element for further financial analysis, such as calculating Adjusted Gross Profit by subtracting Labor Expenses and Marketing Expenses, and ultimately, net profit after all other expenses are accounted for.