Are guest refunds deductible from Gross Sales at a Golden Krust Caribbean Restaurant?
Golden_Krust_Caribbean_Restaurant Franchise · 2024 FDDAnswer from 2024 FDD Document
As used in this Agreement, the term "Gross Sales" means the aggregate amount of all revenues generated from the sale of all products and services sold and all other income of every kind related to the Restaurant, whether for cash or credit (and regardless of collection in the case of credit), whether from sales on the Premises, by delivery, from catering, or other sales methods (whether the sales method is permitted or not). You may not reduce Gross Sales by the amount of any discounts provided to employees, family members and other businesses that you control. Gross Sales do not include sales taxes or other taxes collected from guests for transmittal to the appropriate taxing authority, proceeds from the sale of gift cards or stored value cards, and guest refunds made in good faith. We reserve the right to modify our policies consistent with restaurant industry practices regarding revenue recognition, revenue reporting, and the inclusion in or exclusion of certain revenue from "Gross Sales" as circumstances, business practices, and technology change. A current list of exclusions can be found in the Brand Standards Manual.
Source: Item 22 — CONTRACTS (FDD page 35)
What This Means (2024 FDD)
According to Golden Krust Caribbean Restaurant's 2024 Franchise Disclosure Document, guest refunds made in good faith are excluded from the calculation of Gross Sales. Gross Sales are defined as the total revenue from all products and services, whether in cash or credit, including sales on the premises, deliveries, catering, and other methods.
This definition is important because Golden Krust Caribbean Restaurant franchisees pay a weekly royalty fee of 5% of Gross Sales (or $250, whichever is greater). By excluding guest refunds from Gross Sales, the franchisee's royalty payment is based on net sales rather than the total amount of sales before refunds. This can reduce the royalty fees owed to Golden Krust Caribbean Restaurant.
The FDD also states that Gross Sales should not be reduced by the amount of any discounts provided to employees, family members, and other businesses that the franchisee controls. Sales taxes collected for transmittal to the appropriate taxing authority and proceeds from the sale of gift cards or stored value cards are also excluded from Gross Sales. Golden Krust Caribbean Restaurant retains the right to modify its policies regarding revenue recognition and reporting consistent with restaurant industry practices.