Are chargebacks deducted from Gross Sales for Ella Cafe?

According to Ella Cafe's 2024 Franchise Disclosure Document, chargebacks are not deducted from gross sales. Gross sales include the total selling price of all services and products, along with all income related to the Coffee House, including catering operations, special events, and the full value of meals provided to employees as a benefit, whether paid in cash or credit, and regardless of collection for credit sales. Gross sales also include payments received from vendors and proceeds from business interruption insurance.

Gross sales for Ella Cafe do not include receipts from public telephones, vending machines, or video games (except for the franchisee's share of revenues), sales taxes collected from customers and remitted to the appropriate authority, or proceeds from isolated sales of trade fixtures. Gross sales also exclude discounts on products or services sold to employees, family members, or other businesses the franchisee owns or controls, and amounts paid to, collected by, or shared with third-party food ordering and delivery systems that Ella Cafe allows the franchisee to use.

This definition of gross sales is important because it affects the royalty fees that Ella Cafe franchisees must pay. Royalty fees are typically calculated as a percentage of gross sales, so a broader definition of gross sales will result in higher royalty payments. Franchisees should carefully review the definition of gross sales in the Franchise Agreement and understand what is included and excluded.