How is 'Gross Sales' defined for the purpose of calculating Cinnaholic royalty fees?
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 are defined as the total revenue from all products and services sold at the bakery, along with any other revenues generated from the bakery's operations. This includes sales made by the franchisee or any other person, regardless of whether the sales comply with the franchise agreement terms, and includes cash, credit, barter, or time-based transactions. Gross Sales also encompass sales where orders are taken at the bakery but delivery or performance occurs elsewhere, as well as telephone or similar orders received and fulfilled at the bakery.
For the purpose of calculating royalty and advertising fees, Cinnaholic franchisees can deduct certain items from Gross Sales. 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 Gross Sales. Additionally, franchisees can deduct the amount of any excise or sales tax levied on retail sales that is paid to the appropriate governmental authority.
This definition is important for prospective Cinnaholic franchisees because it directly impacts the calculation of royalty fees, which are a percentage of Gross Sales. Understanding what constitutes Gross Sales and what deductions are allowed is crucial for accurately calculating and paying these fees. Franchisees should be aware of the potential for increased royalty fees (up to 10% of Gross Sales) and a $250 weekly surcharge if they fail to comply with operational standards or other obligations outlined in the franchise agreement. Accurate record-keeping and adherence to the franchisor's guidelines are essential to avoid penalties and ensure proper royalty fee payments.