How are customer refunds, adjustments, credits, and allowances treated in the 'Gross Sales' calculation for a Hydrodog business?
Hydrodog Franchise · 2025 FDDAnswer from 2025 FDD Document
- "Gross Sales" means all revenue derived from operating the HydroDog Business, including, but not limited to, all amounts received at or away from the HydroDog Vehicle from any Services, Products or activities whatsoever including any that are in any way associated with the Marks, Copyrights or System, and whether from cash, check, barter, credit or debit card or credit transactions, including the redemption value of gift certificates redeemed regardless of whether such gift certificates are issued by the HydroDog Business or someone else; but excluding: (1) all federal, state or municipal sales, use or service taxes collected from customers and paid to the appropriate taxing authority; and (2) customer refunds,
adjustments, credits and allowances actually made by the HydroDog Business, provided that such refunds, adjustments, credits and allowances are documented and verifiable.
Source: Item 19 — FINANCIAL PERFORMANCE REPRESENTATIONS (FDD pages 38–40)
What This Means (2025 FDD)
According to Hydrodog's 2025 Franchise Disclosure Document, the calculation of "Gross Sales" for a Hydrodog business excludes customer refunds, adjustments, credits, and allowances. These deductions are permitted only if they are properly documented and verifiable. This means that when calculating the total revenue of a Hydrodog location, a franchisee can subtract the amount of money returned to customers through refunds or given as adjustments, credits, or allowances, from the total revenue received.
This definition of gross sales is important for franchisees because it directly impacts the reported revenue on which royalties and other fees may be based. By allowing these deductions, Hydrodog ensures that franchisees are not paying royalties on revenue that was ultimately returned to the customer. This practice is fairly standard in the franchise industry, as it provides a more accurate reflection of the actual sales generated by the business.
It is important for a prospective Hydrodog franchisee to maintain accurate records of all refunds, adjustments, credits, and allowances provided to customers. This documentation is necessary to justify these deductions from gross sales and ensure compliance with the terms of the franchise agreement. The FDD emphasizes that these deductions must be "documented and verifiable," so franchisees should establish clear procedures for recording and tracking these transactions.