What should a store-level P&L show for retail and personal care?
Split revenue into services and product, because their margins are very different. Show product cost, service payroll and commissions, rent and CAM, royalties and brand fund, card fees, supplies and four-wall profit. Use one chart of accounts in every store so a line means the same thing everywhere and stores can be ranked side by side.
| Line | What goes in it |
|---|---|
| Service revenue | Haircuts, color, treatments, memberships, net of discounts |
| Product revenue | Retail product sales, net of returns |
| Cost of product sold | Product cost for items sold, adjusted for counts and shrink |
| Service payroll and commissions | Stylist, therapist and associate pay, commissions and tips paid through payroll |
| Occupancy | Rent, CAM, real estate taxes and insurance passed through by the landlord |
| Franchise fees | Royalty, brand fund and technology fees |
| Card and processing fees | Merchant and payment processor fees |
| Four-wall profit | Store profit before shared overhead |
How do you account for gift cards and breakage?
A gift card sale is a liability, not revenue. Revenue is recognized when the card is redeemed. Breakage, the part never redeemed, is recognized in proportion to redemptions if you can estimate it. With $10,000 sold and 10% expected breakage, redeeming $4,500 also recognizes $500 of breakage.
| Line | Amount |
|---|---|
| Gift cards sold (liability) | $10,000 |
| Expected breakage (10%) | $1,000 |
| Expected redemptions | $9,000 |
| Redeemed so far | $4,500 |
| Breakage recognized ($4,500 ÷ $9,000 × $1,000) | $500 |
Three practical points for groups. First, a card sold at one store and redeemed at another moves revenue between stores, and sometimes between entities, so record the liability where your policy puts it and settle between entities each month. Second, unclaimed property laws in some states require unused balances to be remitted to the state; those amounts stay a liability and never become breakage revenue. Third, federal rules under Regulation E generally bar gift card funds from expiring within five years of issue or last load, and limit dormancy fees.
How should a multi-location group handle sales tax by location?
Record sales tax collected by store and by jurisdiction, as a liability rather than revenue, and reconcile it to the returns filed each period. Rates and rules differ by place: 45 states levy a statewide sales tax and 38 allow local sales taxes, so stores a few miles apart can charge different rates.
- Set up the POS in each store with the correct combined state and local rate, and review it when rates change.
- Check which items are taxable in each state. Services and retail products are often taxed differently, which matters for salons and spas selling both.
- Post sales tax collected to a payable per store and jurisdiction, and keep it out of the royalty base if the franchise agreement excludes it.
- Each period, reconcile the payable to the amount filed and paid, and clear any difference before close.
Filing the returns is separate from keeping the books. Many groups keep the ledger with their accounting provider and use a CPA or a sales tax service to file.
How should retail franchisees handle landlord CAM and occupancy costs?
Pay monthly CAM estimates, then check each year's reconciliation against the lease: pro rata share, caps on controllable costs, gross-up, excluded items and the management fee. Object in writing before the lease's audit window closes, and book the true-up in that store's books. CAM billed on actual costs stays out of the ASC 842 lease liability.
Retail and personal care stores often sit in shopping centers with many pass-through charges, and some leases add percentage rent once a store's sales pass a breakpoint. Keep rent, CAM, taxes and insurance in separate accounts per store so a spike at one location shows up in the monthly review. The CAM reconciliation guide covers the checks in detail.
What sales are royalties calculated on for retail and salon franchisees?
Royalties and brand fund are usually a percentage of gross sales as the franchise agreement defines them. Check how it treats product versus service sales, sales tax, discounts, returns, tips, and gift cards, which are often counted at redemption rather than at sale. Accrue the fees in the month of the sales and reconcile them to the franchisor's draft.
Build the royalty calculation from each store's POS sales report using the agreement's definitions, not from bank deposits, which are net of card fees and timing differences.