Are sales of prepaid cards included in Crab N Spice's Gross Sales?
Crab_N_Spice Franchise · 2024 FDDAnswer from 2024 FDD Document
Gross Sales does not include (i) bona fide refunds to customers, (ii) sales taxes collected, (iii) sale of used equipment not in the ordinary course of business, or (iv) sales of prepaid cards or similar products (but the redemption of any such card or product will be included in Gross Sales).
Source: Item 6 — OTHER FEES (FDD pages 11–14)
What This Means (2024 FDD)
According to Crab N Spice's 2024 Franchise Disclosure Document, the sale of prepaid cards are not included in gross sales. However, the redemption of those prepaid cards will be included in gross sales. Gross sales is defined as the total dollar amount of all sales generated through your business for a given period, including payment for any services or products sold by you, whether for cash or credit.
This definition of gross sales is important because Crab N Spice franchisees pay both a royalty fee and marketing fund contribution based on a percentage of gross sales. The royalty fee is 6% of gross sales, and the marketing fund contribution is 1% of gross sales.
By excluding the initial sale of prepaid cards from gross sales, Crab N Spice ensures that franchisees are not paying royalty and marketing fees on money that has not yet been used to purchase goods or services. This is a fairly common practice in the franchise industry, as it aligns the fees with actual revenue earned by the franchisee when the cards are redeemed.