How does Beggars Pizza recognize variable consideration related to royalties?
Beggars_Pizza Franchise · 2025 FDDAnswer from 2025 FDD Document
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's franchise agreements include both fixed and variable components in their transaction prices. The variable consideration specifically pertains to royalty revenue, as the transaction price is directly influenced by the franchisee's sales. This means that the amount Beggars Pizza recognizes as royalty revenue can fluctuate based on how well each franchise location performs.
Beggars Pizza recognizes this variable consideration based on the actual amounts incurred each month. In simpler terms, the royalty revenue is calculated and recorded each month based on the franchisee's sales for that period. This approach ensures that the royalty revenue accurately reflects the current sales performance of each franchise.
In addition to royalties, franchisees also receive additional services such as marketing and commissary needs. Marketing fees, which total 1% of the franchisee's weekly sales, are paid directly to Beg Adv, LLC. Commissary stores are ordered and fulfilled with Begcom, LLC. These additional services and fees are managed through affiliated entities as allowed by the franchise agreement.