Are proceeds from vending machines included in the Gross Sales calculation for Ella Cafe?
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 do not include receipts from vending machines installed in the Coffee House, except for the franchisee's share of the revenues. Gross Sales for Ella Cafe 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 and the full value of beverages or meals provided to Franchisee's bona fide employees as a benefit of their employment.
This means that if an Ella Cafe franchisee installs vending machines in their coffee house, the revenue generated from those machines is generally excluded from the gross sales calculation used to determine royalties or other fees owed to the franchisor. However, any portion of the vending machine revenue that the franchisee directly receives as their share would be included in gross sales.
This distinction is important for franchisees to understand, as it affects the amount of royalties they pay. By excluding most vending machine revenue from gross sales, Ella Cafe aims to avoid charging royalties on income that is not directly related to the core coffee house operations. This could incentivize franchisees to install vending machines, as they can retain a larger portion of that revenue. However, franchisees must accurately track and report their share of vending machine revenues to ensure compliance with the franchise agreement.