One question I get is where do you put the franchise fees on your income statement – expenses or cost of goods sold? Typically, the franchise will have a preferred location they want you to report it.
However, you want to include them in your COGS when figuring out your gross margin as they are off the top before you do anything else. So my personal favorite location is in your COGS.
So even if the franchise has you put it in your expenses, make sure to include them when figuring out your GM so you use the right number when looking at potential profit since you are taking these off the top.
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