How do Apricot Lane franchisees recognize royalty and advertising fees as revenue?

According to Apricot Lane's 2025 Franchise Disclosure Document, royalty and advertising fees are recognized as revenue when the underlying revenues are earned by the franchisee. The royalty fees range from 3.00% to 5.50%, while advertising fees range from 0.50% to 1.00% of the franchisee's net revenues. The specific percentage depends on the number of open stores the franchisee operates.

This means that Apricot Lane accounts for these fees as they are earned by the individual franchise locations. As a franchisee generates sales, a percentage of those sales is recognized as royalty and advertising revenue by Apricot Lane. The more stores a franchisee operates, the higher the royalty fee percentage may be, impacting the revenue recognized by Apricot Lane.

This accounting practice is standard in the franchise industry, where franchisors typically recognize royalty and advertising fees as revenue when franchisees make sales. This approach aligns revenue recognition with the actual economic activity occurring at the franchise level. Prospective franchisees should understand how these fees are calculated and when they are due, as they directly impact the franchisor's revenue stream.