What sales are specifically excluded from the definition of Gross Sales for a Churchs Chicken franchise?

According to Churchs Chicken's 2025 Franchise Disclosure Document, Gross Sales are used to calculate royalty fees and advertising contributions. It is important for prospective franchisees to understand what is included and excluded from this definition. Gross Sales includes all revenue from the sale of services and products, and all other income related to the franchised restaurant. This includes revenue from food and merchandise, tangible property, and services performed at the restaurant, including off-premises services like catering and delivery, regardless of the method of collection. This also includes stored value gift cards and gift certificates when redeemed, but not when purchased.

However, the FDD specifies certain exclusions from the Gross Sales calculation. These exclusions include refunds made in good faith to customers for food or merchandise. Also excluded are sales of used equipment not made in the ordinary course of business. Finally, taxes imposed by a governmental authority directly on sales and collected from customers are excluded, provided the tax amount is added to or absorbed in the selling price and actually paid to the governmental authority.

Understanding these exclusions is crucial for Churchs Chicken franchisees as it directly impacts the calculation of royalty fees (5% of Gross Sales) and advertising fund contributions (5% of Gross Sales, with a minimum annual contribution). Franchisees should ensure accurate record-keeping to properly account for these exclusions and avoid any discrepancies during audits. If an audit reveals understated Gross Sales by 2% or more, the franchisee is responsible for reimbursing Churchs Chicken for the audit costs.