What is excluded from 'Gross Sales' when calculating revenue for a Lees Famous Recipe Restaurant?
Lees_Famous_Recipe Franchise · 2025 FDDAnswer from 2025 FDD Document
- I. "Gross Sales" means the aggregate amount of sales of all food and beverages, and other goods and services; the sale of any products or services associated with the use of the Marks, including sales from vending machines, deliveries, and catering sales, whether for cash, on credit or otherwise, made or provided at or in connection with the Restaurant, including off-premises sales and monies derived at or away from the Restaurant; insurance proceeds for lost sales covered by business interruption insurance; and agreements to pay or other consideration, whether or not payment is received at the time of sale or any such amounts prove uncollectible.
The term "Gross Sales" does not include: (1) any federal, state, municipal or other sales, value added, or retailer's excise taxes paid or accrued by you; and (2) adjustments for net returns on salable goods and discounts allowed to customers on sales; or (3) discounts for meals for Restaurant employees.
Gross Sales will not be adjusted for uncollected accounts.
For purposes of the Royalty Fee described in Section 4(B) below, the sale is made at the earlier of delivery of the product or service, or receipt of payment.
We reserve the right to modify our policies and practices regarding revenue recognition,
revenue reporting, and the inclusion or exclusion of certain revenue from "Gross Sales" as circumstances, business practices, and technology change.
Source: Item 23 — RECEIPTS (FDD pages 70–287)
What This Means (2025 FDD)
According to the 2025 FDD, Lees Famous Recipe defines 'Gross Sales' as the total revenue from all food, beverages, goods, and services sold at or related to the restaurant, including sales from vending machines, deliveries, catering, and off-premises sales. This includes cash, credit transactions, insurance proceeds for lost sales covered by business interruption insurance, and agreements to pay, regardless of whether payment is received or collectible.
However, Lees Famous Recipe specifically excludes certain items from the 'Gross Sales' calculation. These exclusions are: (1) federal, state, municipal, or other sales, value-added, or retailer's excise taxes paid or accrued; (2) adjustments for net returns on salable goods and discounts allowed to customers; and (3) discounts for meals provided to restaurant employees.
Notably, Lees Famous Recipe does not allow for adjustments to Gross Sales based on uncollected accounts. The FDD also states that the sale is considered to have occurred for royalty fee purposes at the earlier of the delivery of the product or service, or the receipt of payment. Lees Famous Recipe retains the right to modify its policies regarding revenue recognition, reporting, and the inclusion or exclusion of revenue from 'Gross Sales' due to changing circumstances, business practices, and technology.