Are sales of prepaid cards included in the Gross Sales calculation for Crave Cookies?
Crave_Cookies Franchise · 2025 FDDAnswer from 2025 FDD Document
- "Gross Sales" means the total dollar amount of all sales generated through the Business for a given period, including, but not limited to, payment for any services or products sold by Franchisee, whether for cash or credit. Gross Sales does not include (i) bona fide refunds to customers, (ii) sales taxes collected by Franchisee, (iii) sales 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 22 — CONTRACTS (FDD page 47)
What This Means (2025 FDD)
According to Crave Cookies' 2025 Franchise Disclosure Document, the initial sale of prepaid cards is excluded from the calculation of Gross Sales. However, the redemption of these cards is included in Gross Sales. Gross Sales are used to calculate royalty fees and marketing fund contributions, so this distinction is financially significant for franchisees.
For a Crave Cookies franchisee, this means that when a customer purchases a gift card, the amount is not immediately subject to royalty or marketing fees. However, when the gift card is used to purchase cookies or other items, that transaction is included in Gross Sales and is subject to the applicable fees. This deferred inclusion impacts the timing of when franchisees must pay these fees to Crave Cookies.
This approach is relatively common in the franchise industry, as it prevents franchisees from paying royalties on money that has not yet been used to purchase goods or services. It aligns the royalty payments with actual sales of products, rather than the mere issuance of store credit. Franchisees should keep accurate records of both gift card sales and redemptions to ensure accurate reporting and fee calculation.
Therefore, franchisees need to understand that while initial sales of prepaid cards don't immediately increase their royalty or marketing fund obligations, they will eventually contribute to Gross Sales when customers redeem them. This deferred recognition can affect cash flow and financial planning for the franchise location.