How does Beehive Homes account for direct costs of sales and servicing of franchise agreements?
Beehive_Homes Franchise · 2025 FDDAnswer from 2025 FDD Document
– Revenue Recognition
The Company enters into franchise agreements with franchisees. The Company provides the nonexclusive right and sub-license to use the names, marks, trade secrets, and copyright material under these agreements. The Company provides guidance on selecting a potential architect that could be used in the franchisee's area. In addition, the Company provides pre-opening training and reasonable opening supervision and operations assistance. The franchise agreements require the franchisee to pay an initial, non-refundable fee of $75,000 for the first franchise, $50,000 for each subsequent franchise and a continuing fee based upon a percentage of sales. Direct costs of sales and servicing of franchise agreements are charged to general and administrative
Source: Item 23 — RECEIPTS (FDD pages 34–123)
What This Means (2025 FDD)
According to Beehive Homes' 2025 Franchise Disclosure Document, the company addresses the direct costs associated with the sales and servicing of franchise agreements. These costs are not capitalized or treated as deferred expenses. Instead, Beehive Homes charges these direct costs to general and administrative expenses as they are incurred.
For a prospective franchisee, this accounting practice means that Beehive Homes does not spread out these costs over the life of the franchise agreement. Instead, they recognize the expenses immediately. This approach provides a more transparent view of the company's current financial performance, as all expenses are reflected in the period they occur.
This accounting method is fairly common and considered conservative. It ensures that the financial statements accurately reflect the costs incurred during each reporting period, without relying on future revenue projections to offset current expenses. Franchisees may want to inquire about the specific types of costs included in general and administrative expenses to better understand the financial health and operational efficiency of Beehive Homes.