When does the right to use the B Bops franchise license pass to the customer?
B_Bops Franchise · 2025 FDDAnswer from 2025 FDD Document
Allocate the transaction price to the performance obligations in the contract. The Company's contracts with customers generally consist of two performance obligations, which is the right to purchase the use of the franchise license and then the right to use the license over the term of the contract.
Recognize revenue when or as the Company satisfies a performance obligation. Revenues for franchise fees are recognized at a point in time, which is generally upon oral or written agreement for a franchise contract, which, at this point, right to use the franchise license passes to the customer. Management exercises judgment in determining when such performance obligations for goods have been satisfied. Revenue is also recognized over time as the royalty income per the contract is based on a percentage of gross sales of the franchise and is recognized on a monthly basis when they are earned per the agreement.
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 52–53)
What This Means (2025 FDD)
According to B Bops's 2025 Franchise Disclosure Document, the right to use the franchise license passes to the customer upon oral or written agreement for a franchise contract. At this point, B Bops recognizes revenues for franchise fees at a point in time.
B Bops's contracts with customers generally consist of two performance obligations: the right to purchase the use of the franchise license and the right to use the license over the term of the contract. The company recognizes revenue over time as the royalty income per the contract is based on 5% of gross sales of the franchise each month and is recognized on a monthly basis when they are earned per the agreement.
This means that a franchisee can begin operating under the B Bops brand and utilizing its associated trademarks and systems as soon as the franchise agreement is finalized, either verbally or in writing. This is a fairly standard practice in franchising, as it allows the franchisee to start their business operations promptly after completing the initial agreement.