Is the redemption of prepaid cards included in the Gross Sales of a Desi District franchise?
Desi_District Franchise · 2024 FDDAnswer from 2024 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 52)
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, the redemption of prepaid cards is included in the calculation of Gross Sales. Gross Sales are defined as the total dollar amount of all sales generated through the Business for a given period, including payment for any services or products sold by the franchisee, whether for cash or credit. However, the initial sale of prepaid cards themselves is excluded from Gross Sales.
This means that while a Desi District franchisee does not pay royalties on the initial sale of a gift card, they will pay royalties when that gift card is used by a customer to purchase goods or services at their location. This is a common practice in franchising, as it prevents franchisees from avoiding royalty payments by selling large quantities of gift cards without corresponding product sales.
For a prospective Desi District franchisee, it's important to understand how Gross Sales are calculated, as this figure directly impacts the royalty fees owed to the franchisor. Accurately tracking and reporting sales, including the redemption of prepaid cards, is crucial for compliance with the franchise agreement and for maintaining a transparent financial relationship with Desi District.