When does Apricot Lane recognize revenue from franchise fees?
Apricot_Lane Franchise · 2025 FDDAnswer from 2025 FDD Document
ing Principles in the United States of America (U.S. GAAP).
Revenue Recognition
Revenues from franchise fees are recognized when all services specified by the franchise agreement have been performed, generally when the franchisee's store opens. These services generally include site selection, lease negotiation, marketing, training of the franchisee, training of their employees, and store opening assistance. The initial franchise fee for 2024 and 2023 is $39,500, and the franchise fee for additional stores for an existing franchisee is $20,000.
Income Taxes
The Company has elected to be taxed as an S corporation for federal income tax and California franchise tax purposes. As a result, the Company does not pay federal corporate tax on its income; instead, the stockholders pay tax on their respective shares of such income. California has adopted similar provisions, except that there is a 1.5% franchise tax assessed on California taxable income and a minimum tax of $800.
Source: Item 23 — RECEIPTS (FDD pages 51–222)
What This Means (2025 FDD)
According to Apricot Lane's 2025 Franchise Disclosure Document, revenues from franchise fees are recognized when all services specified in the franchise agreement have been performed. Generally, this occurs when the franchisee's store opens.
The services that Apricot Lane provides before recognizing the revenue include site selection, lease negotiation, marketing, training of the franchisee and their employees, and store opening assistance. The initial franchise fee for both 2024 and 2023 was $39,500. The franchise fee for additional stores for existing franchisees is $20,000.
It is important to note that franchise fees received as income from new store openings in 2024 totaled $732,500 and in 2023 totaled $994,000. However, in accordance with Apricot Lane's accounting policy, the recognition of these fees as revenue is deferred until the store opens. As a result, the company had deferred revenue at December 31, 2024, of $316,500 and at December 31, 2023, of $627,500.