What are the two performance obligations that generally consist in B Bops' contracts with customers?

According to B Bops' 2025 Franchise Disclosure Document, the company's contracts with customers generally include two performance obligations. These obligations consist of granting the right to purchase the use of the franchise license and then granting the right to use the license over the term of the contract. Essentially, B Bops provides the initial license to operate a franchise and then allows the franchisee to continue using that license throughout the duration of their agreement.

For a prospective franchisee, this means that the initial franchise fee covers not only the permission to open a B Bops restaurant but also the ongoing right to operate under the B Bops brand. The revenue recognition for these obligations is split: the franchise fee revenue is recognized at a specific point in time, typically upon the agreement for the franchise contract when the right to use the franchise license is transferred to the franchisee.

In addition to the initial fee, B Bops also recognizes revenue over time through royalty income, which is based on a percentage (5%) of the franchise's gross sales each month. This ongoing revenue recognition aligns with the franchisee's continued use of the B Bops license and operational support. Understanding these performance obligations and revenue recognition methods is crucial for franchisees to grasp how B Bops accounts for its income and what services and rights they are entitled to under the franchise agreement.