Does the definition of 'Gross Sales' for Desi District include the redemption value of prepaid cards?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
Notes
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- "Gross Sales" is defined in our franchise agreement as the total dollar amount of all sales generated through your business for a given period, including, but not limited to, payment for any services or products sold by you, whether for cash or credit. 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 16–20)
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, the definition of 'Gross Sales' does address the treatment of prepaid cards. Gross sales are used to calculate royalty fees, among other things.
Specifically, the FDD states that while the sale of prepaid cards is excluded from gross sales, the redemption value of those cards is included. This means that when a customer uses a prepaid card to purchase goods or services at a Desi District franchise, the amount of that transaction counts towards the franchise's gross sales for royalty calculation purposes.
For a prospective franchisee, this is an important distinction. They will not pay royalties on the initial sale of a prepaid card, but they will pay royalties when the card is used. This aligns with the common practice of only taxing or taking a percentage of revenue when it is actually realized through the provision of goods or services. This also means that Desi District franchisees need to accurately track both the sale and redemption of prepaid cards to properly calculate their gross sales and royalty payments.