Does the 'Gross Sales' definition for Lees Famous Recipe include sales tax?
Lees_Famous_Recipe Franchise · 2025 FDDAnswer from 2025 FDD Document
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- "Gross Sales" means the total amount of all revenues from whatever source derived (whether in the form of cash, credit, insurance proceeds for lost sales covered by business interruption insurance, agreements to pay or other consideration, and whether or not payment is received at the time of sale or any such amounts prove uncollectible) which arise from or are derived by you or by any other person from business conducted or which originated in, on, from or through your Lee's Famous Recipe Restaurant location, or from the sale of any products or services associated with the use of the Marks, including sales from vending machines, deliveries, and catering sales, but excluding sales tax or any similar taxes which are required by law to be computed separately and paid by a customer.
Source: Item 19 — FINANCIAL PERFORMANCE REPRESENTATIONS (FDD pages 59–66)
What This Means (2025 FDD)
According to Lees Famous Recipe's 2025 Franchise Disclosure Document, the definition of "Gross Sales" specifically excludes sales tax. Gross Sales includes the total amount of all revenues from any source, such as cash, credit, insurance proceeds, agreements to pay, or other consideration. This includes revenues derived from business conducted at the Lee's Famous Recipe Restaurant location, sales from vending machines, deliveries, and catering sales.
However, the definition explicitly excludes sales tax or any similar taxes that are required by law to be computed separately and paid by a customer. This means that when Lees Famous Recipe calculates its gross sales for the purpose of royalty payments or financial reporting, franchisees do not include the amount of sales tax collected from customers.
For a prospective franchisee, this is beneficial because it reduces the base upon which royalties and other fees are calculated. It ensures that franchisees are not paying a percentage of money that they are simply collecting on behalf of the government. This exclusion is a fairly standard practice in the franchise industry, as it provides a more accurate representation of the restaurant's actual revenue.