What deductions are permitted from Gross Sales for a Spray Net franchise?
Spray_Net Franchise · 2025 FDDAnswer from 2025 FDD Document
As used in this Agreement, "Gross Sales" include all: (a) revenue from the sale of all products and performance of services from the Franchised Business, whether for cash, credit or barter, and regardless of collection in the case of credit, and income of every kind and nature related to the Franchised Business; and (b) any rebates or other consideration that Franchisee receives from third-party vendors/suppliers. "Gross Sales" from customers will not include monies that are collected and submitted by Franchisee for the transmittal to the appropriate taxing authority.
In computing the Gross Sales, the Franchisee shall be permitted to deduct the amount of cash refunds to, and coupons used by customers at or prior to the time the customer has paid the full balance owed to Franchisee, provided such amounts have been included in sales.
In the event Franchisee participates in any discount program, including but not limited to Groupon (which Franchisor must approve in writing), Gross Sales will include the full retail value of the goods or services rendered to the customer before any discounts or commission.
Source: Item 23 — RECEIPTS (FDD pages 75–219)
What This Means (2025 FDD)
According to Spray Net's 2025 Franchise Disclosure Document, the definition of "Gross Sales" is comprehensive, including all revenue from sales and services, whether in cash, credit, or barter, and any rebates received from third-party vendors. However, the document specifies certain deductions that a franchisee can make when calculating Gross Sales.
Specifically, a Spray Net franchisee is permitted to deduct the amount of cash refunds to customers and the value of coupons used by customers at or before the time they pay their full balance, provided these amounts were initially included in sales. This means that if a customer returns a product or uses a valid coupon, the franchisee does not have to pay royalty fees on that portion of the revenue. It is important to note that these deductions are only applicable if the refunds or coupons are issued before the customer has fully paid their balance.
Furthermore, the FDD clarifies that monies collected and submitted by the franchisee for transmittal to the appropriate taxing authority are excluded from Gross Sales. This means that sales tax or other similar taxes collected on behalf of the government are not included when calculating the revenue on which the royalty fee is based. This is a standard practice in franchising, as the franchisee is simply acting as a collection agent for these taxes and they do not represent actual revenue for the business.
It's also important to note that if a Spray Net franchisee participates in any discount program, such as Groupon, with written approval from Spray Net, Gross Sales will include the full retail value of the goods or services rendered before any discounts or commissions. This means that the franchisee must pay royalty fees on the undiscounted price, even though they may receive a lower amount due to the discount program.