Does the Gross Sales calculation for a Fat Shack franchise include sales taxes?
Fat_Shack Franchise · 2025 FDDAnswer from 2025 FDD Document
"Gross Sales" shall be defined as sales of any kind for all services or products from or through the FAT SHACK Restaurant, including any such sale of services or products made for cash or upon credit, or partly for cash and partly for credit, regardless of collection of charges for which credit is given, regardless of whether such sale is conducted in compliance with or in violation of the terms of this Agreement and regardless of whether such sale is at the Restaurant Location or off-site, but exclusive of discounts, sales taxes or other similar taxes and credits. "Gross Sales" shall include delivery fees and revenue from the redemption of FAT SHACK gift certificates, customer loyalty cards, gift cards and other prepaid cards. "Gross Sales" shall also include the fair market value of any services or products received by Franchisee in barter or exchange for its services and products.
Source: Item 23 — Receipts (FDD pages 53–223)
What This Means (2025 FDD)
According to Fat Shack's 2025 Franchise Disclosure Document, Gross Sales for royalty calculation purposes do not include sales taxes. The FDD specifies that Gross Sales include revenue from all services and products, whether for cash or credit, at the restaurant location or off-site. However, the definition of Gross Sales explicitly excludes discounts, sales taxes, and other similar taxes and credits.
This means that Fat Shack franchisees will not pay royalties on the portion of their revenue collected to remit for sales taxes. This is a common practice in franchising, as franchisees act as collection agents for these taxes, which are then passed on to government entities.
In addition to sales taxes, Gross Sales for a Fat Shack include delivery fees, revenue from gift certificate redemptions, customer loyalty cards, gift cards, and other prepaid cards. The Gross Sales also include the fair market value of any services or products received by the franchisee in barter or exchange for its services and products.