What is included and excluded from 'Gross Sales' calculations 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 Lees Famous Recipe's 2025 Franchise Disclosure Document, "Gross Sales" for royalty fee calculation includes the aggregate sales amount of all food, beverages, other goods/services, and any sales related to the use of their marks. This encompasses sales from vending machines, deliveries, catering, off-premise sales, and any money derived at or away from the restaurant. It also includes insurance proceeds for lost sales covered by business interruption insurance and agreements to pay or other consideration, regardless of when payment is received or if amounts are uncollectible. For royalty fee purposes, a sale is considered made at the earlier of product/service delivery or payment receipt.
However, the following items are excluded from the "Gross Sales" calculation: any sales, value added, or retailer's excise taxes paid or accrued, adjustments for net returns on salable goods and discounts allowed to customers, and discounts for meals provided to restaurant employees. Gross Sales will not be adjusted for uncollected accounts.
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. This means that the specific items included or excluded from Gross Sales could change over time, potentially impacting the royalty fees a franchisee owes. Prospective franchisees should pay close attention to these definitions and any modifications made by Lees Famous Recipe, as they directly affect the franchisee's financial obligations.