How are continuing franchise fees recognized as revenue for Annex Brands?

According to Annex Brands' 2025 Franchise Disclosure Document, continuing franchise fees, which are calculated as a percentage of franchisee sales, are recognized as revenue during the period in which they are earned. This means that Annex Brands recognizes the revenue from these fees as it is generated by the franchisee's sales, aligning the revenue recognition with the actual business activity.

For a prospective Annex Brands franchisee, this accounting practice means that the fees they pay contribute to the franchisor's revenue in the same period that the franchisee makes the sales. This is a standard accounting practice in the franchise industry, where ongoing fees are tied directly to the franchisee's performance.

It is important to note that the specific percentage used to calculate these continuing franchise fees is not detailed in this excerpt, but it is typically outlined in the franchise agreement. Franchisees should carefully review their franchise agreement to understand how these fees are calculated and when they are due.