Under what condition does Antioch Pizza Shop defer revenues and commissions?
Antioch_Pizza_Shop Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company's franchise agreements generally provide for payment of initial fees as well as continuing royalties and marketing fees to the Company based on a percentage of sales. Under the franchise agreement, franchisees are granted the right to operate a location using the Antioch Pizza system for a period of ten years. Under the Company's revenue recognition policy, franchise fees and any corresponding commissions are recognized when the franchisee begins operations. For any franchisees that have not yet begun operations as of year-end, the Company defers both the revenues and commissions. All locations that are expected to begin operations within the following year are categorized as current, while all others are classified as non-current. As of December 31, 2024, 2023, and 2022, the Company had the following deferred revenue and commissions, all of which were considered current:
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 defers revenue and commissions for franchisees who have not yet begun operations by the end of the fiscal year. Specifically, Antioch Pizza Shop's franchise agreements require franchisees to pay initial fees, continuing royalties, and marketing fees based on a percentage of sales. Franchisees are granted the right to operate a location using the Antioch Pizza Shop system for a period of ten years.
For accounting purposes, Antioch Pizza Shop recognizes franchise fees and associated commissions as revenue when a franchisee commences operations. If a franchisee has not started operations by year-end, the company defers both the revenues and commissions. This means that the revenue is not recognized on the income statement until the franchisee actually begins operating their Antioch Pizza Shop location.
The deferred revenues and commissions are categorized based on when the franchisee is expected to begin operations. Locations expected to open within the following year are classified as current, while those expected to open later are classified as non-current. As of December 31, 2024, 2023, and 2022, all of Antioch Pizza Shop's deferred revenue and commissions were considered current.