What is excluded from the calculation of Gross Sales for a Hardees franchise when determining royalty fees?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
Gross Sales shall include all revenue from the sale of all services and products (except HR approved promotional items) and all other income of every kind and nature (excluding revenue from the sale of stored value gift cards or gift certificates but including revenue when gift certificates are redeemed or stored value gift cards are debited) related to the Franchised Restaurant, whether for cash or credit and regardless of collection in the case of credit; provided, however, that Gross Sales shall not include any sales taxes or other taxes collected from customers by Franchisee for transmittal to the appropriate taxing authority.
Source: Item 22 — Contracts (FDD page 85)
What This Means (2025 FDD)
According to Hardees's 2025 Franchise Disclosure Document, Gross Sales for royalty fee calculation includes all revenue from the sale of services and products, except for HR approved promotional items, and all other income, excluding revenue from the sale of stored value gift cards or gift certificates, but including revenue when gift certificates are redeemed or stored value gift cards are debited. Gross Sales includes both cash and credit transactions, regardless of whether the credit has been collected.
In practical terms, this means a Hardees franchisee must pay royalty fees on nearly all income generated by the restaurant. The primary exclusions are sales taxes collected for the government and revenue from the initial sale of gift cards. However, when those gift cards are used by customers, the revenue from those transactions becomes part of Gross Sales and is subject to royalty fees.
This definition of Gross Sales is fairly standard in the franchise industry. Franchisees should be aware of exactly what constitutes Gross Sales, as this figure directly impacts the amount of royalty fees they will owe to Hardees. Accurate record-keeping is essential to ensure proper calculation and payment of these fees. Franchisees should clarify with Hardees any specific revenue streams or transactions if they are unsure whether they should be included in Gross Sales.