factual

Does the Ella Cafe definition of Gross Sales include income related to catering operations?

Ella_Cafe Franchise · 2024 FDD

Answer from 2024 FDD Document

"Gross Sales" Gross Sales is the total Selling Price of all services and products and all income of every other kind and nature related to the Coffee House, including income related to catering operations and special events and the full value of beverages or meals provided to Franchisee's bona fide employees as a benefit of their employment (except Franchisee may deduct from Gross Sales the value of any employee discounts that are given during the week in which the food and beverages are provided), whether for cash or credit and regardless of collection in the case of credit. Gross Sales does not include (a) receipts from any public telephone, vending machine, or video games installed in the Coffee House, except for Franchisee's share of the revenues; (b) sales (or similar) taxes that Franchisee collects from Coffee House customers if such taxes are transmitted to the appropriate taxing authority(ies); (c) proceeds from isolated sales of trade fixtures that are not part of the products and services offered at the Coffee House and that do not have any material effect on the operation of the Coffee House; (d) tips or gratuities paid directly by Coffee House customers to Franchisee's employees or paid to Franchisee and then turned over to employees by in lieu of direct tips or gratuities; or (e) returns to shippers or manufacturers; and (f) amounts paid to, collected by, or shared with third-party food ordering and delivery systems with which we allow the Coffee House to do business, including but not limited to UBER EATS, DOORDASH, and FAVOR. Gross Sales also does not include proceeds from the sale of gift certificates or stored value cards, but it does include the redemption value of gift certificates and stored value cards at the time purchases are made. Franchisee is responsible for the accurate reporting of gift certificate and stored value card sales and the corresponding impact on Gross Sales. Franchisee has until 30 days after the end of Franchisor's fiscal year to notify Franchisor of any errors Franchisee made in calculating Gross Sales as those errors relate to the reporting of gift certificate and stored value card sales. "Selling Price" is defined as the non-discounted, regular menu price.

Source: Item 22 — CONTRACTS (FDD page 50)

What This Means (2024 FDD)

According to Ella Cafe's 2024 Franchise Disclosure Document, Gross Sales does include income related to catering operations. Gross Sales is defined as the total Selling Price of all services and products and all income of every other kind and nature related to the Coffee House, including income related to catering operations and special events. This means that any revenue generated from catering services or special events connected to the Ella Cafe location must be included when calculating Gross Sales.

This definition is important because Ella Cafe franchisees typically pay royalties based on a percentage of Gross Sales. By including catering and special event income in Gross Sales, Ella Cafe ensures that it receives royalties on all revenue streams associated with the franchise.

However, the definition of Gross Sales also specifies certain exclusions. These exclusions include receipts from public telephones, vending machines, sales taxes collected and remitted, proceeds from isolated sales of trade fixtures, tips or gratuities paid to employees, returns to shippers or manufacturers, and amounts paid to or shared with third-party food ordering and delivery systems. Also excluded are proceeds from the sale of gift certificates or stored value cards, but the redemption value of these items is included in Gross Sales when purchases are made. Franchisees have 30 days after the end of Ella Cafe's fiscal year to notify the franchisor of any errors related to gift certificate and stored value card sales calculations.

Disclaimer: This information is extracted from the 2024 Franchise Disclosure Document and is provided for research purposes only. It does not constitute legal or financial advice. Consult with a franchise attorney before making any investment decisions.