When are initial nonrefundable franchise fees recognized as revenue by Beggars Pizza?
Beggars_Pizza Franchise · 2025 FDDAnswer from 2025 FDD Document
es the right to operate a Beggars Pizza location within a defined territory using the franchise brand name.
Initial franchise fees are $25,000 for a restaurant with 150 or fewer seats and $40,000 for a restaurant with more than 150 seats. The Company offers a 50 percent franchise fee discount to a franchisee that opens a second store. This fee is due and nonrefundable upon signing the franchise agreement. The initial nonrefundable franchise fees, which are collected in advance, are recognized as revenue at a point in time franchisee opens their location, or upon termination of such agreement. At the expiration of a franchise agreement, a renewal fee ranging from 10 to 33 percent of the initial franchise fee is due and recognized at a point in time when services related to the renewal agreement are completed. For the years ended December 31, 2024 and 2023, initial franchise fees included in revenue was $8,250 and $28,250, respective
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 39)
What This Means (2025 FDD)
According to Beggars Pizza's 2025 Franchise Disclosure Document, the company recognizes initial nonrefundable franchise fees as revenue when the franchisee opens their location or if the franchise agreement is terminated. These fees are collected in advance. The initial franchise fee is $25,000 for a restaurant with 150 or fewer seats and $40,000 for a restaurant with more than 150 seats. Beggars Pizza offers a 50 percent discount on the franchise fee for franchisees opening a second store.
For a prospective franchisee, this means that while the initial franchise fee is due upon signing the franchise agreement, Beggars Pizza does not recognize this payment as revenue until the store actually opens. If the franchisee, for any reason, does not open the location, Beggars Pizza will recognize the initial fee as revenue upon termination of the agreement.
This accounting practice is important for franchisees to understand, as it affects Beggars Pizza's reported financial performance. It also aligns the revenue recognition with the point at which the franchisee can begin operating and generating revenue, or when the agreement is terminated. For the years ended December 31, 2024 and 2023, initial franchise fees included in revenue was $8,250 and $28,250, respectively. Initial franchise fees deferred totaled $25,000 and $25,000 at December 31, 2024 and 2023, respectively.