What is the definition of 'Gross Sales' for the purpose of calculating the Ella Cafe royalty fee?
Ella_Cafe Franchise · 2024 FDDAnswer 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 are 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. This includes income from catering operations and special events, as well as the full value of beverages or meals provided to bona fide employees as a benefit of their employment. The calculation is based on cash or credit transactions, regardless of whether payment has been collected for credit sales. The Selling Price is defined as the non-discounted, regular menu price.
However, the definition of Gross Sales also specifies several exclusions. These exclusions include receipts from public telephones, vending machines, or video games (except for the franchisee's share of revenues), sales taxes collected from customers that are then transmitted to the appropriate taxing authorities, and proceeds from isolated sales of trade fixtures not part of the regular products and services offered. Additionally, tips or gratuities paid directly to employees or turned over to them in lieu of direct tips, returns to shippers or manufacturers, and amounts paid to, collected by, or shared with third-party food ordering and delivery systems like UBER EATS, DOORDASH, and FAVOR are also excluded from Gross Sales.
Furthermore, the proceeds from the sale of gift certificates or stored value cards are not included in Gross Sales until the point when those certificates or cards are redeemed for purchases. Ella Cafe franchisees are responsible for accurately reporting gift certificate and stored value card sales and their impact on Gross Sales. Franchisees have a 30-day window after the end of the franchisor's fiscal year to notify the franchisor of any errors made in calculating Gross Sales related to the reporting of gift certificate and stored value card sales. This detailed definition ensures that royalty fees are calculated on a consistent and fair basis across all franchise locations, while also accounting for various income streams and deductions specific to the Ella Cafe business model.