How does Antioch Pizza Shop determine the allocation of the initial franchise fee?
Antioch_Pizza_Shop Franchise · 2025 FDDAnswer from 2025 FDD Document
In determining the allocation of transaction price (the initial franchise fee) to either the license or to the preopening services, the Company has determined that the standalone selling price of its pre-opening services exceeds the initial franchise fee received; as such, the Company allocates the entire initial franchise fees to those preopening services. The franchise fees are then recognized as revenue when those pre-opening services have been completed (which generally occurs upon commencement of the associated franchised location's operations).
Source: Item 21 — Financial Statements (FDD page 56)
What This Means (2025 FDD)
According to Antioch Pizza Shop's 2025 Franchise Disclosure Document, the company allocates the initial franchise fee based on the standalone selling price of pre-opening services. Antioch Pizza Shop has determined that the standalone selling price of its pre-opening services exceeds the initial franchise fee. As a result, the company allocates the entire initial franchise fee to these pre-opening services.
These pre-opening services, which Antioch Pizza Shop may or may not provide all of, include assistance in site selection, help in obtaining and preparing facilities (including financing, architectural, and engineering services, and lease negotiation), training of personnel or the franchisee, preparation and distribution of manuals, bookkeeping, IT, and advisory services, and inspection and quality control programs.
The franchise fees are recognized as revenue when these pre-opening services have been completed. This generally occurs when the franchised location commences operations. This means that Antioch Pizza Shop does not recognize the initial franchise fee as revenue until the franchisee has opened their location and is actively running the business.