What constitutes Gross Sales for the purpose of calculating Cinnaholic's Royalty Fee?
Cinnaholic Franchise · 2025 FDDAnswer from 2025 FDD Document
- 5.2. Definition of Gross Sales. Gross Sales shall mean the amount of sales of all products and services sold in, on, about or from the Bakery, together with any other revenues derived from the operation of the Bakery, whether by Franchisee or by any other person, whether or not in accordance with the terms hereof, and whether for cash or on a charge, credit, barter or time basis, including, but not limited to, all such sales and services (i) where orders originate and/or are accepted by Franchisee in the Bakery but delivery or performance thereof is made from or at any place other than the Bakery or (ii) pursuant to telephone or other similar orders received or filled at or in the Bakery. For purposes of determining the Royalty Fee and Advertising Fee, there shall be deducted from Gross Sales: (a) the amount of refunds, allowances or discounts to customers (including coupon sales) up to 10% of the Gross Sales, provided the related sales have previously been included in Gross Sales; and (b) the amount of any excise or sales tax levied upon retail sales and paid over to the appropriate governmental authority.
Source: Item 22 — CONTRACTS (FDD pages 61–62)
What This Means (2025 FDD)
According to Cinnaholic's 2025 Franchise Disclosure Document, Gross Sales for royalty fee calculation includes the total revenue from all products and services sold at the bakery. This encompasses all sales, whether paid in cash, credit, barter, or any other form of payment. It also includes revenues from orders originating or accepted at the bakery, even if the delivery or performance occurs elsewhere, as well as telephone or similar orders received or fulfilled at the bakery.
However, Cinnaholic does allow for certain deductions from Gross Sales when calculating the royalty fee. These deductions include refunds, allowances, or discounts to customers, including coupon sales, up to a maximum of 10% of Gross Sales, provided these sales were previously included in the Gross Sales figure. Additionally, the amount of any excise or sales tax levied on retail sales and remitted to the appropriate governmental authority can also be deducted.
For a prospective Cinnaholic franchisee, understanding this definition is crucial because the royalty fee, which is 5% of Gross Sales, directly impacts profitability. Accurately tracking and reporting all sales, while also accounting for allowable deductions, is essential for compliance and financial management. Failure to adhere to the operational standards in the Operations Manual or Section 9 of the agreement could result in an increased royalty fee of 10% and a surcharge of $250 per week until the issues are resolved.