When does Bb.Q Chicken recognize initial franchise fees as revenue?
Bb_Q_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchise revenues principally consist of royalties, as well as marketing fees, which are primarily based on a percentage of franchise revenue. Franchise revenue also includes initial franchise fees, which are recognized as revenue when a substantial performance of franchisor obligation is complete, which is generally when a franchised unit is opened.
However, when revenue from initial fees is collectible over an extended period of time, and collectability is not reasonably assured, revenue is recognized using the installment method as fees are collected.
Source: Item 23 — RECEIPTS (FDD pages 62–283)
What This Means (2025 FDD)
According to Bb.Q Chicken's 2025 Franchise Disclosure Document, the company recognizes initial franchise fees as revenue when a substantial performance of the franchisor's obligations is complete. Generally, this occurs when the franchised unit is opened. This means Bb.Q Chicken does not recognize the entire initial franchise fee as revenue until the franchisee has opened their location.
However, there is an exception to this general rule. If the collection of the initial fees is extended over a period of time and collectability is not reasonably assured, Bb.Q Chicken uses the installment method. Under the installment method, the company recognizes revenue as the fees are collected.
For a prospective Bb.Q Chicken franchisee, this accounting practice means that the initial franchise fee you pay may not be fully recognized by Bb.Q Chicken as revenue until your store opens. If you are on an extended payment plan and collectability is uncertain, Bb.Q Chicken will only recognize revenue as you make payments. This can affect the company's financial statements and may be a factor to consider when evaluating the financial health of the franchisor.