When does Ben Jerrys recognize royalty fees from its scoop shops?
Ben_Jerrys Franchise · 2025 FDDAnswer from 2025 FDD Document
Royalty fees are earned from franchisees under terms of the franchise agreement and are up to 3% of monthly gross sales of franchise owned scoop shops. Under ASC 606, the Company applies the exception for variable consideration in the form of sales-based royalties and records its royalty revenue monthly, since these royalties relate to the Company's license of intellectual property (one performance obligation). The Company recognizes royalty fees in the month that the scoop shop recognizes its gross sales.
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 89–133)
What This Means (2025 FDD)
According to Ben Jerrys's 2025 Franchise Disclosure Document, royalty fees, which can be up to 3% of monthly gross sales, are recognized in the same month that the scoop shop recognizes its gross sales. Ben Jerrys earns these royalty fees from franchisees based on the terms outlined in the franchise agreement. The document specifies that Ben Jerrys applies an exception for variable consideration related to these sales-based royalties.
This means that a Ben Jerrys franchisee will be assessed royalty fees based on their monthly sales, and Ben Jerrys will record that revenue in the corresponding month. This is a common practice in franchising, where royalties are typically a percentage of gross sales and are recognized as revenue when those sales occur.
Prospective franchisees should understand that royalty payments are directly tied to their sales performance each month. Therefore, higher sales will result in higher royalty payments to Ben Jerrys. Franchisees should factor this into their financial projections and business planning.