Are sales of prepaid cards included in Gross Sales for Endless Summer Sweets?
Endless_Summer_Sweets Franchise · 2024 FDDAnswer from 2024 FDD Document
- "Gross Sales" means the total dollar amount of all sales generated through the Business for a given period, including, but not limited to, payment for any services or products sold by Franchisee, whether for cash or credit. Gross Sales does not include (i) bona fide refunds to customers, (ii) sales taxes collected by Franchisee, (iii) sales of used equipment not in the ordinary course of business, or (iv) sales of prepaid cards or similar products (but the redemption of any such card or product will be included in Gross Sales).
Source: Item 23 — RECEIPTS (FDD pages 39–125)
What This Means (2024 FDD)
According to Endless Summer Sweets' 2024 Franchise Disclosure Document, the initial sales of prepaid cards are excluded from gross sales calculations. However, the redemption of these cards is included in gross sales.
This means that when an Endless Summer Sweets franchisee initially sells a gift card, the revenue from that sale is not counted towards the franchisee's gross sales. Gross sales are important because royalties and other fees are often calculated as a percentage of gross sales. However, when a customer uses the gift card to purchase products or services at the Endless Summer Sweets location, the value of that redemption is included in the gross sales figure for that period.
This practice is fairly standard in the franchise industry, as it prevents revenue from being counted twice. By excluding the initial sale of the prepaid card but including its redemption, Endless Summer Sweets ensures that revenue is only recognized when a product or service is actually provided to the customer.