What is specifically excluded from the definition of 'Gross Sales' for a Fat Shack unit?

According to Fat Shack's 2025 Franchise Disclosure Document, 'Gross Sales' is defined as sales of any kind for all services or products purchased from or through the applicable unit, including cash or credit sales, whether on-site or off-site. However, the definition specifically excludes discounts, sales taxes, or other similar taxes and credits. It does include delivery fees and revenue from the redemption of Fat Shack gift certificates, customer loyalty cards, gift cards and other prepaid cards.

For a prospective Fat Shack franchisee, this definition is important because royalties and other fees owed to Fat Shack are typically calculated as a percentage of Gross Sales. Understanding what is included and excluded from this calculation is crucial for accurately forecasting revenue and expenses. By excluding discounts and sales taxes, Fat Shack ensures that franchisees are not paying royalties on amounts that do not actually contribute to the restaurant's net income.

It is common in the franchise industry to define Gross Sales in a similar manner, excluding taxes and discounts. This approach provides a clearer picture of the actual revenue generated by the business before these deductions. Franchisees should carefully review the definition of Gross Sales in their Franchise Agreement to fully understand their financial obligations to the franchisor.

Prospective franchisees should also note that the FDD emphasizes that the financial performance representations provided are based on Gross Sales only and do not include information on cost of goods sold, operating expenses, or net profit. Therefore, franchisees must conduct their own due diligence to determine the potential profitability of a Fat Shack franchise, taking into account all relevant expenses and costs.