For Ella Cafe, what is included in the definition of Gross Sales?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
pose fees on you.
Note 2: Gross Sales is the total selling price of all services and products and all income of every other kind and nature related to your Coffee House including income related to catering operations and special events and the full value of meals provided to your bona fide employees as a benefit of their employment, whether for cash or credit and regardless of collection in the case of credit. Gross Sales is not reduced by the amount of any discounts on products or services sold to employees, family members, or other businesses you own or control or by the amount paid to, collected by, or shared with third-party food ordering and delivery systems with which we allow the Coffee House to do business. Gross Sales does not include (i) receipts from any public telephone, vending machine, or video games, if any, installed in your Coffee House, except for your share of the revenues; (ii) sales (or similar) taxes that you collect from your customers if you transmit them to the appropriate taxing authority; (iii) proceeds from isolated sales of trade fixtures
that are not part of the products and services you offer and that do not have any material effect on the operation of your Coffee House; (iv) tips or gratuities paid directly by customers to your employees or paid to you and then turned over to these employees by you in lieu of direct tips or gratuities; or (v) returns to shippers or manufacturers. Gross Sales also does not include proceeds from the sale of gift certificates or stored value cards (all proceeds from the sale of gift certificates and stored value cards belong to us), but it does include the redemption value of gift certificates and stored value cards at the time purchases are made. You are responsible for the accurate reporting of gift certificate and stored value card sales and the corresponding impact on Gross Sales. You have until 30 days after the end of our fiscal year to notify us of any errors you 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. All barter and exchange transactions for which you furnish services or products in exchange for goods or services to be provided by the vendor, supplier or customer will be valued at the full retail value of the memberships bartered in exchange for the good or services provided to you. Gross Sales also includes the proceeds of any business interruption insurance paid to you. Gross sales also includes any payments you receive from vendors. Chargebacks are not deducted from Gross Sales.
Note 3: We currently require you to pay royalty fees and other amounts due to us by pre-authorized bank draft. However, we can require an alternative payment method at our sole discretion.
Source: Item 6 — OTHER FEES (FDD pages 10–15)
What This Means (2024 FDD)
According to Ella Cafe's 2024 Franchise Disclosure Document, Gross Sales encompasses the total selling price of all services and products, along with all income related to the Coffee House. This includes income from catering operations and special events, as well as the full value of meals provided to employees as a benefit, whether paid in cash or credit, and regardless of whether the credit is actually collected. Gross Sales also includes proceeds from business interruption insurance and payments received from vendors. Barter and exchange transactions are valued at the full retail value of the goods or services provided to Ella Cafe. The redemption value of gift certificates and stored value cards are included in Gross Sales at the time of purchase. Chargebacks are not deducted from Gross Sales.
However, Gross Sales does not include certain items. These exclusions are receipts from public telephones, vending machines, or video games (except for Ella Cafe's share of the revenues), sales taxes collected and remitted to the appropriate taxing authority, and proceeds from isolated sales of trade fixtures. Additionally, discounts on products or services sold to employees, family members, or other businesses owned or controlled by the franchisee do not reduce Gross Sales. The amounts paid to, collected by, or shared with third-party food ordering and delivery systems that Ella Cafe is allowed to do business with are also not deducted from Gross Sales.
For a prospective Ella Cafe franchisee, understanding the inclusions and exclusions in the Gross Sales definition is crucial because royalty fees are typically calculated as a percentage of Gross Sales. Accurate reporting of Gross Sales, including gift certificate and stored value card sales, is the franchisee's responsibility. Franchisees have a 30-day window after the end of Ella Cafe's fiscal year to notify the company of any errors in Gross Sales calculations related to gift certificate and stored value card sales. This detailed definition ensures that both the franchisee and Ella Cafe have a clear understanding of the revenue base used for calculating royalties and other fees.