What is excluded from the definition of 'Gross Sales' for an Hck Hot Chicken franchise?
Hck_Hot_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
Gross Sales excludes: (i) sales taxes, value added or other tax, excise or duty charged to customers, based on sales at or from your Restaurant; (ii) tips, gratuities or service charges paid directly by customers to your employees or paid to you and promptly turned over to your employees in lieu of direct tips or gratuities; and (iii) proceeds from isolated sales of equipment and trade fixtures that are not part of your products and services offered for resale at your Restaurant nor having any material effect upon the ongoing operation of your Restaurant.
For items sold using coupons or other discounts (which we must approve), Gross Sales also excludes the amount discounted from the purchase price of such item and from sales of prepaid gift cards and certificates, but franchisees must pay Continuing Royalties and Brand Fund Contributions on sales from the redemption of gift cards and/or certificates at their Restaurant(s).
Source: Item 6 — OTHER FEES (FDD pages 13–19)
What This Means (2025 FDD)
According to Hck Hot Chicken's 2025 Franchise Disclosure Document, "Gross Sales" is a critical figure, as it is the basis for calculating royalty fees and other contributions. The document specifies several exclusions from the calculation of Gross Sales. These exclusions directly impact the amount of royalties and contributions a franchisee will owe.
Specifically, Gross Sales for an Hck Hot Chicken restaurant excludes (i) sales taxes, value added or other tax, excise or duty charged to customers, (ii) tips, gratuities, or service charges paid directly to employees or passed on to them, and (iii) proceeds from isolated sales of equipment and trade fixtures not part of the regular products and services, provided these sales do not materially affect the restaurant's ongoing operations. These exclusions are standard practice in the franchise industry, as they prevent franchisees from being charged royalties on revenues that are either pass-through (like sales tax) or not part of the core business model.
Additionally, the Gross Sales calculation excludes the amount discounted from the purchase price of items sold using approved coupons or other discounts. It also excludes sales of prepaid gift cards and certificates. However, franchisees must pay Continuing Royalties and Brand Fund Contributions on sales from the redemption of gift cards and/or certificates at their Restaurant(s). This means that while the initial sale of a gift card isn't included in gross sales, the revenue generated when the gift card is used is subject to royalties and contributions. This is a common practice to ensure that the franchisor receives its share of revenue when the gift card is ultimately used for purchases.