How does Nothing Bundt Cakes define "COGS" in the context of its financial performance representation?
Nothing_Bundt_Cakes Franchise · 2025 FDDAnswer from 2025 FDD Document
| Royalty & Marketing Fees | $108,752 | $149,821 | $225,791 | $161,455 | $147,204 | | | % of Net Revenues | 11.0% | 11.0% | 11.0% | 11.0% | 11.0% | | | 4-Wall EBITDA | $172,037 | $284,477 | $493,258 | $316,591 | $286,974 | 124 / 42% | | % of Net Revenues | 17.4% | 20.9% | 24.0% | 21.6% | 21.4% | |
Footnotes:
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- "Net Revenues" is defined in Part I, above.
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- "COGS" is defined as all direct costs, including dry ingredients, packaging, and decorating costs.
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- "Gross Profit" is defined as Net Revenues less COGs.
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- "Labor" is defined as the cost of hourly employees, manager salary, bonus payments, 401k and other benefits, health insurance, workers comp, payroll tax, outside employment services, staff meetings, and employee related expenses. It excludes owner salary or draw ("Owner Payroll") from 174 Bakeries that reported Owner Payroll and adjusts to remove estimated Owner Payroll within the remaining 123 Bakeries that did not report Owner Payroll within their "Labor" costs. The 174 Bakeries that reported Owner Payroll incurr
Source: Item 19 — FINANCIAL PERFORMANCE REPRESENTATION (FDD pages 71–80)
What This Means (2025 FDD)
According to Nothing Bundt Cakes' 2025 Franchise Disclosure Document, COGS, or Cost of Goods Sold, is defined as all direct costs including dry ingredients, packaging, and decorating costs. This definition is important because it directly impacts the Gross Profit calculation, which is defined as Net Revenues less COGS. Understanding what constitutes COGS allows a franchisee to accurately assess the profitability of their Nothing Bundt Cakes bakery.
For a prospective franchisee, knowing the specific components of COGS is crucial for budgeting and financial forecasting. By understanding that COGS includes ingredients, packaging, and decorating costs, franchisees can better estimate their expenses and manage their inventory. This also allows for a more accurate calculation of the Gross Profit, which is a key indicator of the bakery's financial health.
In Part III of Item 19, the FDD provides an analysis of Net Revenues and Costs for 297 franchised bakeries. The average COGS for these bakeries was $344,687. Breaking this down further, the Bottom 1/3 of bakeries had average COGS of $239,074, the Mid 1/3 had average COGS of $317,012, and the Top 1/3 had average COGS of $477,975. These figures provide a benchmark for franchisees to compare their own COGS and identify areas for potential cost savings or efficiency improvements.