Are sales 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 initial sale of prepaid cards is excluded from gross sales calculations. However, the redemption of these prepaid cards for products or services at a Desi District franchise is included in the gross sales.
For a prospective franchisee, this distinction is important for calculating royalty fees and marketing contributions, which are based on a percentage of gross sales. The franchisee will not pay a percentage on the initial sale of a prepaid card, but will pay a percentage when the card is used by a customer to make a purchase.
This policy ensures that Desi District franchisees are only paying fees on actual revenue generated from sales of products and services, rather than on the initial issuance of stored value. Franchisees should maintain accurate records of both prepaid card sales and redemptions to properly calculate and report gross sales to the franchisor.