Does the Cinnabon franchise agreement specify the exact method for calculating Net Sales?
Cinnabon Franchise · 2025 FDDAnswer from 2025 FDD Document
"Net Sales" means all revenues generated by your Bakery or conducted from or with respect to the Bakery, whether the sales are evidenced by cash, check, credit, charge, account, barter or exchange.
Net Sales includes monies, gift card redemptions, or credit generated by or received from (i) the sale of Approved Products or tangible property of every kind and nature, promotional or otherwise, anywhere and (ii) services performed from, at, or in connection with the Bakery, including (x) off-premises services (such as catering and delivery), (y) on-premises services (such as games, gambling machines, or third-party advertising within the Bakery), or (z) any other services or activities that use either the System, the Marks, or products that are the same as or similar to the Approved Products.
The foregoing list is not intended to provide approval for such activities, which may be conducted only if approved.
Unless we specify otherwise in writing, Net Sales shall include all ancillary charges or fees, including delivery fees and other service charges, that are paid to you by a customer or by a third-party delivery or catering service (e.g., Uber Eats, Postmates, Grubhub, ezCater, or DoorDash) (a "TPS") in connection with delivery or catering services related to your Bakery (recognizing that though the TPS may pay you an amount equal to the purchase price charged to the customer less a commission, other fees, and any discounts, credits, or coupons applied to that order, such commission, fees, discounts, credits, and coupons will not be deducted from your Net Sales).
Source: Item 6 — OTHER FEES (FDD pages 31–45)
What This Means (2025 FDD)
According to Cinnabon's 2025 Franchise Disclosure Document, the term "Net Sales" is specifically defined within the context of the franchise agreement. Net Sales encompass all revenues generated by the Cinnabon bakery, irrespective of the payment method, including cash, checks, credit, or barter. This broad definition includes revenues from the sale of approved products and services related to the bakery, covering both on-premises and off-premises activities like catering and delivery.
Specifically, Net Sales include monies, gift card redemptions, or credit received from the sale of approved products or tangible property, as well as services performed at or in connection with the bakery. This includes off-premises services like catering and delivery, on-premises services like games or third-party advertising, and any other activities that utilize the Cinnabon system, trademarks, or products similar to the approved products. The FDD clarifies that this list is not an endorsement of such activities, which require explicit approval.
The definition of Net Sales also addresses ancillary charges, such as delivery fees and service charges, paid by customers or third-party delivery services like Uber Eats or DoorDash. These charges are included in Net Sales, even if the third-party service remits the purchase price to the franchisee after deducting commissions, fees, discounts, or coupons. This means that the franchisee's Net Sales calculation is based on the gross revenue before any deductions made by these third-party services. This comprehensive definition is important because several fees, such as the Advertising Contribution and Local Marketing Obligation, are calculated as a percentage of Net Sales.
For a prospective Cinnabon franchisee, understanding this definition is crucial for accurate financial reporting and compliance with the franchise agreement. It ensures that all applicable revenues are included in the calculation of Net Sales, which directly impacts the franchisee's financial obligations to Cinnabon. Franchisees should pay close attention to the inclusion of all revenue streams, including those from third-party delivery services and ancillary charges, to avoid any discrepancies or underreporting of Net Sales.