When does Bb.Q Chicken recognize sales revenue?
Bb_Q_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
Revenue Recognition:
The Company recognizes sales revenue when title and risk of loss have been transferred to the customer, there is persuasive evidence of an arrangement, shipment and passage of title has occurred, the sales price is fixed or determinable and collectability is reasonably assured. 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. Continuing fees are recognized as earned, with an appropriate provision for estimated uncollectible amount charged to general and administrative expense. The Company recognizes renewal fees in income when a renewal agreement becomes effective.
The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contracted assets), and customer advances and deposits (contract liabilities) on the consolidated balance sheet. Amounts are billed as work progresses in accordance with agreed-upon contractual terms either at periodic interval or upon achievement of contractual milestones. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. However, the Company sometimes receive advances or deposits from the customers before revenue is recognized, resulting in contract liabilities. These deposits are liquidated when revenue is recognized.
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 sales revenue when the title and risk of loss have been transferred to the customer. This occurs when there is persuasive evidence of an arrangement, shipment and passage of title has occurred, the sales price is fixed or determinable, and collectability is reasonably assured.
Bb.Q Chicken also recognizes franchise revenues, which primarily consist of royalties and marketing fees based on a percentage of franchise revenue. Initial franchise fees are recognized as revenue when a substantial performance of the franchisor's obligations is complete, typically when the franchised unit opens. However, if initial fees are collected over an extended period and collectability is not reasonably assured, the installment method is used, recognizing revenue as fees are collected. Continuing fees are recognized as earned, with a provision for estimated uncollectible amounts.
Renewal fees are recognized as income when a renewal agreement becomes effective. The timing of revenue recognition, billings, and cash collections can result in billed accounts receivable, unbilled receivables (contracted assets), and customer advances and deposits (contract liabilities) on the consolidated balance sheet. Amounts are billed as work progresses according to contractual terms, either periodically or upon achieving contractual milestones. Generally, billing occurs after revenue recognition, resulting in contract assets, but advances or deposits received before revenue recognition result in contract liabilities, which are liquidated when revenue is recognized.