For Beard Papas, when is revenue recognized?
Beard_Papas Franchise · 2025 FDDAnswer from 2025 FDD Document
assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the period. Actual results could differ from those estimates.
Revenue Recognition
Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflect the consideration the Company expects to receive in exchange for those products or services.
A performance obligation is a promise in a contract to transfer a distinct goods or service to the customer and is the basis of revenue recognition in accordance with U.S GAAP. A contract's transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.
The Company's revenues are mainly composed of a) revenue from the Company-owned restaurant, b) distribution revenue, c) commission income and d) franchise fees.
(A Wholly-Owned Subsidiary of Nagatanien Holdings Co., Ltd.)
Notes to Financial Statements (continued)
a) Revenue from the Company-Owned Restaurant
Revenues from sales of food and beverages at the company-owned restaurant are recognized at the point in time when they are served to customers.
b) Distribution Revenue
The Company requires its franchised stores to purchase food and packaging products and restaurant equipment through its established distribution network. The timing of revenue recognition for distribution revenues varies depending on the contract terms. Distribution revenues for franchise stores are recognized upon receipt of the products by the franchisees. Distribution revenues for franchise stores located in Canada are recognized upon shipment of goods to franchisees. The Company satisfies performance obligations when control of the products is passed to customers, which is the point in time that customers are able to direct the use of and obtain substantially all of the remaining economic benefit of the goods.
c) Commission Income
Beginning April 1, 2018, the Company entered into a commission rate agreement with JFC International Inc. ("JFC"), an Asian foods importer, to distribute various foods to all domestic Beard Papa's® locations. The Company charges JFC monthly commission fees based upon various rebate rates, as well as additional volume rebates on sales of certain products. The rebate rates and amounts are determined by the rebate agreement. Commission income is recognized at the point in time when the rebate is earned each period as the underlying sales by JFC occur.
d) Franchise Fees
The Company collects franchise fees from the sale or renewal of individual franchise agreements and area development agreements for the development of multiple shops within a designated territory.
Source: Item 23 — RECEIPTS (FDD pages 58–275)
What This Means (2025 FDD)
According to Beard Papas's 2025 Franchise Disclosure Document, revenue recognition depends on the type of revenue. For company-owned restaurants, revenue from food and beverage sales is recognized when the items are served to customers. This is a standard practice in the restaurant industry, as it marks the point when the service is fully provided and the customer receives the benefit.
For distribution revenue, the timing varies based on contract terms and location. In the United States, revenue is recognized when the products are received by the franchisees. In Canada, it's recognized upon shipment of goods to franchisees. For international locations, revenue is recognized upon delivery of the products at the U.S. shipping docks. This variation accounts for the different shipping times and logistical considerations in different regions.
Commission income from JFC International Inc. is recognized when the rebate is earned each period as the underlying sales by JFC occur. This means that Beard Papas recognizes the income as JFC sells the products, aligning the revenue recognition with the actual sales activity. In general, Beard Papas recognizes revenue when control of the products is passed to customers, which is when customers can direct the use of and obtain substantially all of the remaining economic benefit of the goods.