What sales taxes are excluded from the 'Net Royalty Sales' calculation for a Noodles & Company franchise?
Noodles_Company Franchise · 2025 FDDAnswer from 2025 FDD Document
The term "Net Royalty Sales" means the aggregate amount of all sales of food, beverages and other products and merchandise sold and services rendered at or from the restaurant location or otherwise rendered to or for your Noodles & Company restaurant or your use of the Marks, including sales at or away from your Noodles & Company restaurant, whether for cash or credit, and regardless of collection in the case of credit, but excluding: (1) all federal, state or municipal sales or service taxes collected from customers and paid to the appropriate taxing authority; and (2) all bona fide, documented: (a) customer promotional discounts approved by us; (b) refunds; (c) voids; and (d) employee meal discounts.
Source: Item 6 — OTHER FEES (FDD pages 19–22)
What This Means (2025 FDD)
According to Noodles & Company's 2025 Franchise Disclosure Document, the calculation of 'Net Royalty Sales' excludes specific sales taxes. Net Royalty Sales is the basis for calculating royalty fees and certain marketing fees. It encompasses all sales of food, beverages, other products, merchandise, and services at or from the restaurant, including sales both at and away from the Noodles & Company restaurant, whether for cash or credit. This broad definition ensures that almost all revenue streams are included in the calculation. However, there are some exclusions.
The key exclusion related to taxes is for all federal, state, or municipal sales or service taxes collected from customers and then paid to the appropriate taxing authority. This means that Noodles & Company franchisees do not pay royalties or marketing fees on the tax amounts they collect on behalf of the government. This is a standard practice in franchising, as franchisees are merely acting as collection agents for these taxes.
In addition to sales taxes, the 'Net Royalty Sales' calculation also excludes bona fide, documented customer promotional discounts approved by Noodles & Company, refunds, voids, and employee meal discounts. These exclusions reduce the base upon which the royalty and marketing fees are calculated, potentially lowering the fees paid by the franchisee. Prospective franchisees should ensure they maintain accurate records of all exclusions to ensure accurate royalty and marketing fee calculations.