Are customer refunds or adjustments included in the Gross Sales calculation for a Crave franchise?
Crave Franchise · 2025 FDDAnswer from 2025 FDD Document
For the purposes of determining the royalties to be paid under the Franchise Agreement, "Gross Sales" means the total selling price of all services and products and all income of every other kind and nature related to the Franchised Business, whether for cash or credit and regardless of collection in the case of credit, and including any third-party delivery fees. If a cash shortage occurs, the amount of Gross Sales will be determined based on the records of the point-of-sale system and any cash shortage will not be considered in the determination. Gross Sales expressly excludes taxes collected from your customers and paid to the appropriate taxing authority and customer refunds or adjustments.
You must report your Gross Sales to us by Tuesday each week for the previous week ending Sunday. The Royalty Fee and brand development fee (for Restaurants only) will be withdrawn from your designated bank account by electronic funds transfer ("EFT") weekly on Wednesday based on the Franchised Business' Gross Sales for the preceding week ending Sunday. If you do not report the Franchised Business' Gross Sales, we may debit your account for 120% of the last Royalty Fee and brand development fee (for Restaurants only) that we debited. If the fees we debit are less than the fees you actually owe us, once we have been able to determine the true and correct Gross Sales, we will debit your account for the balance on a day we specify. If the fees we debit are greater than the fees you actually owe us, we will credit the excess against the amount we otherwise would debit from your account during the following week.
Source: Item 6 — OTHER FEES (FDD pages 12–19)
What This Means (2025 FDD)
According to Crave's 2025 Franchise Disclosure Document, customer refunds or adjustments are expressly excluded from the calculation of Gross Sales for the purpose of determining royalty fees. Gross Sales is defined as the total selling price of all services and products, including all income related to the franchised business, whether in cash or credit, and including third-party delivery fees. Cash shortages are not considered in the determination of Gross Sales if the point-of-sale system has a record of the sale. Taxes collected from customers and remitted to the appropriate taxing authority are also excluded from Gross Sales.
This definition is important for prospective Crave franchisees because it directly impacts the amount of royalty fees they will owe to Crave. By excluding customer refunds and sales taxes from the Gross Sales calculation, Crave ensures that franchisees are not paying royalties on money that is either returned to customers or passed through to government entities. This is a fairly standard practice in the franchise industry, as royalty fees are typically based on the net sales that the franchisee retains.
Franchisees must report their Gross Sales to Crave by Tuesday of each week for the previous week ending on Sunday. Royalty fees and brand development fees (for Restaurants only) are then withdrawn from the franchisee's designated bank account via electronic funds transfer (EFT) every Wednesday. If a franchisee fails to report Gross Sales, Crave may debit the account for 120% of the last royalty and brand development fee debited. Crave will reconcile any discrepancies between the estimated and actual fees once the true Gross Sales are determined, debiting or crediting the franchisee's account accordingly.