Are proceeds from the sale of coupons included in the gross sales of an I Got My Sound Chicken restaurant?
I_Got_My_Sound_Chicken Franchise · 2024 FDDAnswer from 2024 FDD Document
In addition to the foregoing, the following are included within the definition of "Gross Sales" described except as noted below:
(1) The full value of meals furnished to Franchisee's employees as an incident to their employment, except that the value of any discounts extended to such employees may be credited against Gross Sales during the reporting month in which the meals were furnished for the purpose of determining the amount of Gross Sales upon which the Royalty Fee is due; and
(2) All proceeds from the sale of coupons, gift certificates or vouchers; provided that at the time such coupons, gifts certificates or vouchers are redeemed the retail price thereof may be credited against Gross Sales during the reporting month in which such coupon, gift certificate or voucher is redeemed for the purpose of determining the amount of Gross Sales upon which the Royalty Fee is due.
Source: Item 22 — Contracts (FDD page 40)
What This Means (2024 FDD)
According to I Got My Sound Chicken's 2024 Franchise Disclosure Document, the proceeds from the sale of coupons, gift certificates, or vouchers are included in the gross sales of an I Got My Sound Chicken restaurant. However, when these coupons, gift certificates, or vouchers are redeemed by customers, the retail price can be credited against gross sales during the reporting month in which they are redeemed. This impacts the calculation of the royalty fee owed to I Got My Sound Chicken.
This means that while the initial sale of coupons contributes to the gross sales figure used to calculate royalties, the franchisee receives a credit against gross sales when the coupons are actually used by customers. This ensures that the franchisee is not paying royalties on the value of discounts or offers provided through coupons at the time of redemption.
For a prospective I Got My Sound Chicken franchisee, it's important to understand how coupon sales and redemptions are tracked and reported. Accurate record-keeping is essential to ensure correct royalty fee calculations. Franchisees should clarify with I Got My Sound Chicken the specific procedures for reporting coupon sales and redemptions to avoid any discrepancies or overpayment of royalties. This also allows the franchisee to strategically use coupons to drive sales without incurring additional royalty fees on the discounted portion of the sales.