What sales are excluded from the Gross Sales calculation for a Gold Star franchise?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
Sales by Company-operated restaurants were recognized when food and beverage items were sold and were reported, net of sales taxes collected from guest that are remitted to the appropriate taxing authorities.
Presentation of Sales Tax
Various states impose a sales tax on the Company's sales to nonexempt customers. The Company collects that sales tax from customers and remits the entire amount to the state. The Company's accounting policy is to exclude the tax collected and remitted to the state from revenues and cost of sales.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to the 2025 Gold Star Franchise Disclosure Document, sales taxes collected from guests and remitted to the appropriate taxing authorities are excluded from gross sales. This means that when calculating revenue for purposes such as royalty fees or marketing contributions, Gold Star franchisees do not include the sales tax they collect on behalf of the state.
This exclusion is a common practice in the franchise industry, as the franchisee is simply acting as a collection agent for the government. Including sales tax in gross sales figures would inflate the franchisee's revenue and result in higher royalty and marketing fee payments, which would not accurately reflect the franchisee's actual earnings.
Therefore, a prospective Gold Star franchisee should understand that their financial obligations to Gold Star, such as royalty fees and contributions to the Brand Building Fund, will be calculated based on their revenue after deducting sales taxes. This ensures a fairer calculation of fees and a more accurate representation of the franchisee's financial performance.