Reporting Your Gross Sales

This page covers how to report Gross Sales: what counts, the reporting routine, the underreporting threshold, and how to amend a report. This page summarizes the reporting obligation in the Franchise Fees & Royalties Policy, which governs. Royalties are calculated on Gross Sales, so it is the most expensive number in your business to get wrong: every error compounds into the royalty, the marketing fund contribution, and, if it is discovered on audit, interest and audit costs.

What counts

Gross Sales is defined by your agreement, not by approximation. The definition sets out gross revenue from the franchised business before deductions, with specific inclusions and exclusions spelled out. Confirm yours in the fee exhibit. The questions that actually cause disputes

• Refunds. Does a refunded sale reduce the period's Gross Sales, or was it counted when the sale happened? Your agreement says. Do not assume.
• Taxes collected. Sales tax you collect is generally excluded: it is not your revenue. But "generally" is not "always"; check your agreement.
• Gift cards. Sale of the card versus redemption of the card: one of these is the revenue event, and counting both is double-counting. Your agreement picks one.
• Discounts and comps. Gross usually means before discounts, but some agreements net them. This is a real-money distinction at volume.

The agreement's definition controls: its inclusions, exclusions, and timing: and the reporting mechanics below operate around it.

The reporting routine

Your agreement sets the cadence: weekly or monthly. The discipline is the same either way

1. Close the period cleanly. Make sure the period's orders, refunds, and adjustments are all posted before you report. A report filed while refunds are still arriving is a report you will have to amend.
2. Report one number, one way. Gross Sales for the period, computed the same way every time. If your method changes (a new point-of-sale flow, new product lines), document the change and keep the old method's figures for the transition period.
3. Keep the backup. The report is a number; the backup is the transaction detail behind it. Keep both. The franchisor may verify your reported figures against payment-processing records: that is the system working, not an accusation. If your number and the processor's number disagree, you want your detail in hand before that conversation. See Audits and Inspections.

The underreporting trap

The Franchise Audit & Inspection Policy sets a 2% underreporting threshold that allocates audit costs to you. Read that number for what it is: a 2% error on real volume is an entirely plausible bookkeeping mistake, and it still costs you the audit. The threshold is not there to punish fraud: fraud is handled much more severely: it is there to make careless reporting expensive enough that nobody is careless. The cheapest audit is the one that never happens because your numbers reconcile.

Your defenses are practical: reconcile reported Gross Sales to your payment processor statements every period before filing; investigate variances the same day, not at quarter-end; never let "we will true it up later" become a habit. Later never comes, and the true-up always favors the auditor.

Amending a report

If you find an error after filing, amend promptly and in writing. A voluntary amendment before anyone asks is a bookkeeping correction; the same error found on audit is underreporting. The difference between those two outcomes is entirely about who found it first. When you amend, state the period, the original figure, the corrected figure, and the cause. Keep it factual; nobody needs a narrative.

Related pages

• Royalties and the Marketing Fund
• Audits and Inspections