What sales are specifically excluded from Cinnabon's definition of 'Net Sales'?

According to Cinnabon's 2025 Franchise Disclosure Document, 'Net Sales' for the purposes of calculating royalties and other fees, does not include several specific categories of transactions. These exclusions provide clarity for franchisees on which revenues are subject to these fees.

Specifically, the following are excluded from Net Sales: (a) the initial sales or reloading of gift cards, meaning the initial value loaded onto a gift card is not considered a sale until it is redeemed; (b) discounts, which reduces the overall sales figure upon which royalties are calculated; (c) the sale of food or merchandise for which refunds have been made in good faith to customers, ensuring that franchisees are not penalized for legitimate refunds; (d) the discounted portion of employee meals, recognizing that these are not full-price sales; (e) sales, meals, use or excise tax imposed by a governmental authority directly on sales and collected from customers, provided that the amount for the tax is added to the selling price or absorbed therein and is actually paid by you to a governmental authority, as these taxes are pass-through amounts; (f) the sale of equipment used in the operation of the Bakery, as this is a one-time transaction and not part of the regular sales of goods; and (g) tips, which are provided directly to employees and not considered revenue for the bakery.

Understanding these exclusions is crucial for Cinnabon franchisees as it directly impacts the calculation of royalties and other fees payable to the franchisor. Franchisees should ensure accurate record-keeping to properly account for these exclusions and avoid overpayment of fees. This level of detail in defining 'Net Sales' is typical in franchise agreements to minimize disputes and ensure transparency in financial reporting.