Are sales taxes included in Cinnabon's definition of 'Net Sales'?
Cinnabon Franchise · 2025 FDDAnswer from 2025 FDD Document
Net Sales will not include (a) the initial sales or reloading of gift cards, (b) discounts, (c) the sale of food or merchandise for which refunds have been made in good faith to customers, (d) the discounted portion of employee meals, (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, (f) the sale of equipment used in the operation of the Franchised Business, or (g) tips.
Source: Item 23 — Receipts (FDD pages 114–399)
What This Means (2025 FDD)
According to Cinnabon's 2025 Franchise Disclosure Document, net sales do not include sales, meals, use, or excise taxes imposed by a governmental authority directly on sales and collected from customers. This means that Cinnabon franchisees do not have to pay royalties or advertising fees on the portion of revenue collected to cover sales tax.
Specifically, the FDD states that for tax to be excluded from net sales, the amount for the tax must be added to the selling price or absorbed therein and must actually be paid to a governmental authority by the franchisee. This ensures that only legitimate tax payments are excluded from the net sales calculation.
This definition of net sales is beneficial for Cinnabon franchisees because it reduces the base on which royalties and advertising contributions are calculated, thereby lowering these expenses. It is a fairly standard practice in franchising to exclude sales tax from net sales.