Gross sales
What it means
Gross sales (often called gross revenue or turnover) is the top line, the total value of goods and services sold, before rent, wages, cost of goods or any other expense is taken out. It is not profit and gives no indication on its own of whether an outlet is viable.
The term matters because percentage fees are usually charged on gross sales, so the franchisor is paid on turnover regardless of the outlet's costs or margin. The exact definition in your agreement determines what is included, for example whether GST, delivery-platform sales, gift-card redemptions or refunds are counted.
Franchisees typically report gross sales to the franchisor through the point-of-sale or reporting system, and fees are then drawn on that figure, commonly weekly or monthly.
In practice
Read the agreement's definition of gross sales closely. Whether items like GST, online-marketplace orders, staff meals or discounts are included or excluded changes the fee base and therefore what you actually pay.
Never judge an outlet on gross sales alone. Two stores with identical turnover can have very different profitability once rent, labour and cost of goods are accounted for, which is why unit economics matter more than the headline sales figure.
A real example
An outlet rings up $12,000 of sales in a week. If the agreement defines gross sales as sales excluding GST, the fee base is about $10,900, and a 7% royalty plus 2% levy is charged on that figure, roughly $980 for the week, before the franchisee has paid a cent of rent, wages or stock.
Gross sales, FAQs
Is gross sales the same as profit?
No. Gross sales is total revenue before any costs. Profit is what remains after rent, wages, cost of goods and all other expenses, including franchise fees, are deducted.
Does gross sales include GST?
It depends on how your agreement defines it. Some define gross sales inclusive of GST and some exclusive, which changes the base fees are charged on, so check the wording.
Why do franchisors charge fees on gross sales?
It ties their income to your turnover and is simple to verify through the point-of-sale system, but it also means fees are payable even when an outlet makes little or no profit.
How does the franchisor know my gross sales?
Typically through the network's point-of-sale and reporting systems, which report your turnover so royalties and levies can be calculated and drawn automatically.
See the full franchise glossary, the Fee Index or our buyer guides.