What is the relationship between the Net Sales calculation and the Franchise Agreement for Cream?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
Net Sales is calculated in the same manner as Net Sales under the Franchise Agreement, and includes all revenue derived from operating the Item 19 Shops, whether from cash, check, vouchers, tickets, or other comparable forms of payment, credit and debit card, barter exchange, trade credit, or other credit transactions, net of authorized discounts (i.e., employee discounts, free birthday scoops, and good neighbor discounts and loyalty rewards).
Net Sales excludes: (i) all federal, state, or municipal sales, use, or service taxes collected from customers and paid to the appropriate taxing authority, and (ii) tips and gratuities collected for employees of the Shops.
Payments from online group-bought deals, gift certificate or gift card programs, or other similar programs were included in Net Sales upon redemption.
Source: Item 19 — FINANCIAL PERFORMANCE REPRESENTATIONS (FDD pages 51–57)
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, the calculation of Net Sales used in Item 19 (Financial Performance Representations) is the same as the definition of Net Sales within the Franchise Agreement. This consistency is important because it ensures that the financial performance data presented by Cream is calculated using the same standards that will govern the franchisee's financial reporting and royalty payments under the Franchise Agreement.
Net Sales for Cream includes all revenue from operating the shops, encompassing various forms of payment such as cash, checks, vouchers, credit and debit cards, and even barter exchanges. Authorized discounts like employee discounts, free birthday scoops, good neighbor discounts, and loyalty rewards are deducted from the gross revenue to arrive at Net Sales. Payments from online group-bought deals, gift certificates, and gift card programs are included in Net Sales upon redemption.
However, Net Sales for Cream specifically excludes certain items. These exclusions are: (i) all federal, state, or municipal sales, use, or service taxes collected from customers and paid to the appropriate taxing authority, and (ii) tips and gratuities collected for employees of the Shops. This distinction is crucial for franchisees as it clarifies what revenue is subject to royalty calculations and what is not.
By aligning the Net Sales calculation in Item 19 with the Franchise Agreement, Cream provides a transparent and consistent basis for evaluating financial performance. Prospective franchisees can use this information to better understand the potential revenue streams and obligations associated with operating a Cream franchise.