How does Beef O Bradys recognize royalties from franchised restaurants?
Beef_O_Bradys Franchise · 2025 FDDAnswer from 2025 FDD Document
me upon delivery of product to customers. The Company presents sales net of sales tax. Promotional discounts and sales allowances are netted against sales and are recognized as incurred. Promotional discounts and sales allowances totaled $3,669,784 and $3,207,490 for the years ended 2024 and 2023, respectively.
Royalties are recognized from franchised restaurants at a point in time when the related franchisee restaurant sale occurs. Royalty rates range from 2.0% to 4.0% of net monthly franchisee sales. At times, non-performing stores may receive temporary abatements of royalties as determined by management; in these instances, no revenues are recorded.
The Company has an agreement with the manufacturer of certain sauces and dressings, whereby the Company earns royalties. Royalties under the agreement are recognized at a point in time when the product is sold by the manufacturer to the Company or franchisees.
Technology fees from franchise stores are recognized at a point in time, as the services are rendered. Annual technology fees are $2,400.
Initial, transfer, renewal, and area development franchise fees are recognized over time, as the Company satisfies the performance obligations set forth in the respective agreements, over the terms stated in the agreements, generally 10 years from when the agreements are executed. Initial, transfer, renewal, and area development franchise fees are typically fixed and collected upfront, unless specifically stated otherwise in the agreement. The Company does not consider this advance payment to include a significant financing component, as it is used to protect th
Source: Item 23 — RECEIPTS. (FDD pages 66–330)
What This Means (2025 FDD)
According to Beef O Bradys's 2025 Franchise Disclosure Document, royalties from franchised restaurants are recognized at the point in time when the related franchisee restaurant sale occurs. The royalty rates range from 2.0% to 4.0% of net monthly franchisee sales. However, Beef O Bradys may provide temporary abatements of royalties for non-performing stores, as determined by management, and in these instances, no revenues are recorded.
In addition to royalties from franchised restaurants, Beef O Bradys also earns royalties through an agreement with a manufacturer of certain sauces and dressings. These royalties are recognized when the manufacturer sells the product to the company or its franchisees.
Beef O Bradys also collects technology fees from franchise stores, which are recognized at a point in time as the services are rendered. The annual technology fees amount to $2,400. Initial, transfer, renewal, and area development franchise fees are recognized over time, as the company satisfies the performance obligations set forth in the respective agreements, generally over a 10-year period from when the agreements are executed. These fees are typically fixed and collected upfront and recorded as deferred revenue on the balance sheets. Termination fees are recognized at a point in time when the franchisee closes.