Are customer refunds excluded from the 'Gross Sales' calculation for a Hydrodog franchise?
Hydrodog Franchise · 2025 FDDAnswer from 2025 FDD Document
- 6.10 Definition of Gross Sales. As used in this Agreement, the term "Gross Sales" means all revenue you derive from operating your HydroDog Business, including, but not limited to, all amounts you receive 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 by you regardless of whether such gift certificates are issued by you 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 your HydroDog Business.
Source: Item 23 — RECEIPTS (FDD pages 43–166)
What This Means (2025 FDD)
According to Hydrodog's 2025 Franchise Disclosure Document, customer refunds are indeed excluded from the calculation of Gross Sales. Gross Sales are defined as all revenue derived from operating the HydroDog Business. This includes all amounts received at or away from the HydroDog Vehicle from any services, products, or activities associated with the HydroDog brand, whether paid in cash, check, barter, credit, debit card, or credit transactions, including the redemption value of gift certificates.
However, the definition explicitly excludes certain items from Gross Sales. These exclusions include all federal, state, or municipal sales, use, or service taxes collected from customers and paid to the appropriate taxing authority. Additionally, customer refunds, adjustments, credits, and allowances actually made by the HydroDog Business are also excluded from the Gross Sales calculation.
For a prospective Hydrodog franchisee, this means that when calculating the weekly royalty fee, which is the greater of 7% of Gross Sales or $250, they do not have to include the amounts refunded to customers, reducing the royalty payment. This exclusion provides a financial benefit to the franchisee, as it lowers the base upon which the royalty is calculated. It is important for franchisees to maintain accurate records of all refunds, adjustments, credits, and allowances to ensure proper calculation and reporting of Gross Sales.