Are telephone orders received at the Cinnaholic Bakery included in the calculation of Gross Sales?
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 include sales from telephone orders received at the bakery. The Royalty Fee, which is 5% of Gross Sales, and the Advertising Fee, which cannot exceed 2% of Gross Sales, are calculated based on these sales. Gross Sales is defined as the total revenue from all products and services sold in, on, about, or from the Cinnaholic Bakery. This encompasses all revenues derived from the bakery's operations, whether the sales are made by the franchisee or any other person, and regardless of whether the transactions are in cash, on a charge, credit, barter, or time basis.
Specifically, Gross Sales include sales where orders originate and/or are accepted by the franchisee at the bakery, but the delivery or performance occurs elsewhere. It also includes sales pursuant to telephone or similar orders received or filled at the bakery. This means that even if a customer places an order over the phone and picks it up or has it delivered, the revenue from that order is included in the Gross Sales calculation for royalty and advertising fee purposes.
There are some deductions allowed from Gross Sales for the purpose of determining the Royalty Fee and Advertising Fee. These deductions include refunds, allowances, or discounts to customers, including coupon sales, up to 10% of Gross Sales, provided the related sales have previously been included in Gross Sales. Additionally, the amount of any excise or sales tax levied upon retail sales and paid over to the appropriate governmental authority can be deducted. This ensures that franchisees are not paying royalty and advertising fees on amounts that are refunded to customers or paid as sales tax.
For a prospective Cinnaholic franchisee, this definition of Gross Sales is important because it forms the basis for calculating both the Royalty Fee and the Advertising Fee, which are ongoing expenses. Understanding what constitutes Gross Sales and what deductions are allowed is crucial for accurately forecasting revenue and expenses. Franchisees should also be aware of the requirement to report Gross Sales weekly and make corresponding payments for Royalty and Advertising Fees.