Are sales of used equipment included in the 'Gross Sales' calculation for a Desi District franchise?

According to Desi District's 2024 Franchise Disclosure Document, the calculation of 'Gross Sales' for royalty purposes excludes sales of used equipment under specific conditions. Gross Sales is defined as the total dollar amount of all sales generated through the Business, including payments for services or products sold, whether for cash or credit. However, this definition explicitly excludes bona fide refunds to customers, sales taxes collected by the franchisee, and sales of used equipment not in the ordinary course of business. It also excludes sales of prepaid cards or similar products, although the redemption of such cards or products will be included in Gross Sales.

For a prospective Desi District franchisee, this means that while most revenue streams are subject to the royalty fee of 4% of Gross Sales, there are some exceptions. The exclusion of used equipment sales not in the ordinary course of business suggests that if a franchisee occasionally sells used equipment, these sales would not be included in the Gross Sales calculation. This could be relevant if, for example, a franchisee upgrades equipment and sells the old equipment to offset the cost of the new equipment.

It is important for franchisees to accurately track and report their sales, distinguishing between sales that are included in Gross Sales and those that are excluded. This ensures accurate royalty payments and compliance with the franchise agreement. The franchisor, Desi District Franchise Group, has the right to remotely access the franchisee's point-of-sale system to calculate Gross Sales, so maintaining accurate records is essential for transparency and avoiding discrepancies. Franchisees should seek clarification from Desi District regarding what constitutes 'the ordinary course of business' in relation to used equipment sales to ensure full compliance.