Gross Sales

Gross sales are typically the basis for calculating ongoing royalty fees and advertising fund contributions. The franchise agreement defines exactly what constitutes gross sales, and some items (like sales tax collected) may be excluded. Understanding the gross sales definition is important because it directly impacts how much you pay in royalties. A franchise that generates $1 million in gross sales at a 6% royalty rate, for example, would owe $60,000 in annual royalties regardless of profitability.