What obligations does Beggars Pizza have to franchisees?
Beggars_Pizza Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company has obligations to provide franchisees with the franchise rights to operate a Beggars Pizza store, and to assist with site selection, training, preparing and distributing operating manuals and menus, and with conducting inspections under their quality control program. The Company has elected the practical expedient to account for the pre-opening services provided to franchisees as distinct from the franchise license and recognize pre-opening services as a single performance obligation. Therefore, the initial franchise fee for each agreement is allocated to each individual franchise and recognized at a point in time when a new franchise location opens. Renewal fees are recognized at a point in time when renewal performance obligations are completed. Income for royalties are recognized over the term of the respective franchise agreement as the underlying sales occur.
The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for providing franchisees with the franchise rights to operate a store. To determine the transaction price, the Company considers its customary business practices and the terms of the underlying agreement. For the purpose of determining transaction prices, the Company assumes performance obligations will be satisfied as promised in accordance with franchise agreements and that agreements will not be canceled, renewed or modified. The Company's franchise agreements with franchisees have transaction prices that contain a fixed and variable component. Variable consideration includes revenue related to royalties, as the transaction price is based on the franchisees sales. The variable consideration is recognized based on the actual amounts incurred each month. Franchisees receive additional services such as marketing and commissary needs, which are provided by affiliated entities as allowed by the franchise agreement. Marketing fees totaling 1% of the franchisee weekly sales are paid by franchisees directly to Beg Adv, LLC. Commissary stores at each franchisee are ordered and fulfilled with Begcom, LLC.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 39)
What This Means (2025 FDD)
According to Beggars Pizza's 2025 Franchise Disclosure Document, the company has several obligations to its franchisees. These obligations primarily revolve around providing support and resources to help franchisees establish and operate their Beggars Pizza stores.
Specifically, Beggars Pizza is obligated to grant franchisees the rights to operate a Beggars Pizza store. Additionally, Beggars Pizza assists with site selection to find suitable locations for the franchise. Beggars Pizza also provides training to franchisees and their staff to ensure they understand the Beggars Pizza business model and operational procedures. They also prepare and distribute operating manuals and menus to help franchisees maintain consistency and quality. Beggars Pizza conducts inspections under their quality control program.
These services are typically covered by the initial franchise fee, which is recognized as revenue when the new franchise location opens. Furthermore, franchisees receive ongoing services such as marketing and commissary needs, which are provided by affiliated entities as allowed by the franchise agreement. Franchisees pay marketing fees totaling 1% of their weekly sales directly to Beg Adv, LLC, and order commissary stores from Begcom, LLC.