When is B Bops royalty income recognized?
B_Bops Franchise · 2025 FDDAnswer from 2025 FDD Document
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, royalty income is recognized over time. Specifically, B Bops recognizes royalty income as it is earned each month.
Since the royalty fee is based on a percentage of the gross sales of the franchise, B Bops recognizes this revenue monthly as the franchisee makes sales. This is a common practice in franchising, as royalties are typically tied to ongoing sales and support provided by the franchisor.
For a prospective B Bops franchisee, this means that B Bops recognizes its royalty revenue as the franchisee operates their business and generates sales. The FDD specifies that the royalty fee is 5% of gross sales.