Are sales taxes included in the calculation of 'Net Revenues' for a Nothing Bundt Cakes franchise?
Nothing_Bundt_Cakes Franchise · 2025 FDDAnswer from 2025 FDD Document
You must pay a weekly royalty fee on Tuesday of each week equal to Six Percent (6%) of your "Net Revenues" during the immediately preceding calendar week ("Royalty"). "Net Revenues" includes all revenues you generate from all business conducted at or from your Bakery during the preceding reporting period, including amounts received from the sale, shipping and delivery of food items, amounts received through the E-Commerce program and from gift card sales, and other products and services, merchandise, and tangible property of any nature whatsoever, whether in cash or for credit, and whether collected or uncollected. Unless we specify otherwise in writing, "Net Revenues" shall include all revenue that is paid to you by any 3PD Provider (e.g. Uber Eats or Door Dash) in connection with such delivery services related to your Bakery, regardless of whether a 3PD Provider remits to you the purchase price charged to the Guest less a commission or other fee or charge. "Net Revenues" does not include the amount of any applicable sales tax imposed by any federal, state, municipal or other governmental authority if such taxes are stated separately when the Guest is charged and you pay such amounts as and when due to the appropriate taxing authority.
Source: Item 23 — RECEIPTS (FDD pages 93–309)
What This Means (2025 FDD)
According to the 2025 Nothing Bundt Cakes FDD, sales taxes are not included in the calculation of "Net Revenues" if they meet specific conditions. "Net Revenues" is a critical figure because the franchisee's weekly royalty payment is based on it.
Specifically, the FDD states that the amount of any applicable sales tax imposed by a governmental authority is excluded from "Net Revenues" if the taxes are stated separately when the guest is charged. Additionally, the franchisee must pay these sales tax amounts to the appropriate taxing authority when due. This means that Nothing Bundt Cakes franchisees do not pay royalties on sales tax they collect and remit to the government.
This is a common practice in franchising, as franchisees typically act as collection agents for sales taxes. By excluding sales taxes from "Net Revenues", Nothing Bundt Cakes ensures that franchisees are not paying royalties on funds that are simply pass-through payments to government entities. Franchisees should ensure they properly document and report sales taxes to comply with these guidelines.