When does All Team earn initial franchise fee income?
All_Team Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company maintains its books and prepares its financial statements on the accrual basis of accounting wherein revenue is recognized when earned and invoiced and expenses are recognized when incurred. Furthermore, initial franchise fee income is earned upon execution of the franchise agreement, which is nonrefundable. The Company receives royalties based upon a percentage of annual sales volume of its affiliates and franchisees. Additionally, funding and processing fees are based on a percentage of gross billings.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 33)
What This Means (2025 FDD)
According to All Team's 2025 Franchise Disclosure Document, the company recognizes initial franchise fee income upon the execution of the franchise agreement. This means that All Team earns the initial franchise fee when both parties sign the franchise agreement, legally binding the franchisee to the terms and conditions outlined in the document. The FDD specifies that these initial franchise fees are nonrefundable.
For a prospective All Team franchisee, this means that once the franchise agreement is signed, All Team considers the initial franchise fee as earned, regardless of whether the franchisee has opened their business or begun operations. Given the nonrefundable nature of the fee, franchisees should carefully evaluate their decision before signing the agreement.
This revenue recognition policy is a fairly standard practice in the franchise industry. Franchisors typically recognize initial franchise fees as revenue when they have fulfilled their initial obligations, such as providing training and site selection assistance. The key takeaway is that the franchisee should be fully prepared to move forward once the agreement is signed, as the initial fee is immediately recognized as income by All Team and will not be refunded.