How will the prepaid expenses of $78,218 be handled for Bb.Q Chicken?
Bb_Q_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
chise agreements provide for the payment of a franchise fee for each opened franchised location. Franchisees pay continuing fees of 5 % of gross sales.
Notes to Consolidated Financial Statements December 31, 2023 and 2022
Initial franchise fees, which may be up to $35,000 are generally recognized when substantially all services or conditions relating to the franchise sale have been performed or satisfied by the Company. Services provided by the Company include assistance in site selection, personal training, and implementation of an accounting and quality control system. When initial fees are collected over an extended period of time and no reasonable basis for estimating collectability exist, equal amount of fees and expenses are recognized when fees are collected, and profit is recognized only after all costs have been recovered.
**NO
Source: Item 23 — RECEIPTS (FDD pages 62–283)
What This Means (2025 FDD)
According to Bb.Q Chicken's 2025 Franchise Disclosure Document, prepaid expenses are addressed in the notes to the consolidated financial statements. As of December 31, 2023, the company had prepaid expenses totaling $78,218.
The FDD states that this $78,218 is recorded as prepaid expenses on the company's books. This means that Bb.Q Chicken paid for these expenses in advance, before actually receiving the goods or services.
The document specifies that these prepaid expenses will be charged to the appropriate expense accounts when they are actually incurred. In accounting terms, this means the prepaid amount will be recognized as an expense on the income statement in the period that the benefit is received, rather than when the cash was initially paid out. This is standard accounting practice, ensuring expenses are matched to the periods they benefit.