How does Beehive Homes account for initial franchise fees on its balance sheet?
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 expenses as incurred. Accounting Standards Codification Topic 606 under U.S. GAAP (ASC 606) provides that revenues are to be recognized when control of promised goods or services is transferred to a customer in an amount that reflects the consideration expected to be received for those goods or services. The standard does not change the recognition of royalties from homes operated by franchisees, which are recognized at the time the underlying sales occur. The standard does change the timing in which the Company recognizes initial fees.
The Company's primary revenue streams are from initial franchise fees and monthly royalty fees charged to franchise owners. Royalty fees are based on a percentage of gross receipts collected by the franchisees and will fluctuate directly with the level of sales generated by franchisees. Franchise fees are one-time payments at the initiation of a franchise agreement and can vary greatly from year-to-year depending on the number of franchised locations that are opened.
The Company derives revenue from nonrefundable transfer fees, which are charged to existing franchisees when they want to transfer their franchise license to another franchisee. The nonrefundable transfer fee is reimbursement to the Company for legal, accounting, credit, and investigation expenses incurred in support of facilitating the transfer. These fees are earned and recognized at the
Source: Item 23 — RECEIPTS (FDD pages 34–123)
What This Means (2025 FDD)
According to Beehive Homes' 2025 Franchise Disclosure Document, the company recognizes revenue when control of promised goods or services is transferred to a customer, reflecting the consideration expected. This aligns with Accounting Standards Codification Topic 606 under U.S. GAAP (ASC 606). The standard changes the timing in which Beehive Homes recognizes initial fees.
Beehive Homes' primary revenue comes from initial franchise fees and monthly royalty fees from franchise owners. Royalty fees are a percentage of gross receipts and fluctuate with franchisee sales. Franchise fees are one-time payments at the start of a franchise agreement and can vary yearly based on the number of new franchised locations.
Additionally, Beehive Homes generates revenue from nonrefundable transfer fees when franchisees transfer their license to another franchisee. These fees reimburse Beehive Homes for legal, accounting, credit, and investigation expenses and are recognized at the time of the transfer.