What amount of revenue did Bens Soft Pretzels recognize over time?

record an accrual for compensated absences.

December 31, 2024, 2023, and 2022

NOTE 2 – REVENUE RECOGNITION

Revenue recognition

The Company recognizes revenue in accordance with ASC 606. There are four sources of revenue: initial franchise fees, royalty fees, advertising fund fees, and other income. In general, revenue is recognized when the Company satisfies a performance obligation by transferring control over a product or service to a customer. The revenue recognition policy for each revenue stream is as follows:

Initial Franchise Fee Revenue – The Company enters into franchise or license agreements that grant franchisees or licensees the right to operate individual Ben's Soft Pretzels locations in exchange for an initial franchise fee. The Company's performance obligations consist of the franchise license which includes the use of the brand, initial services including pre-opening training, and ongoing services including advertising and operational support. Management has determined that these performance obligations are highly interrelated and therefore are not considered to be distinct under ASC 606. As a result, they are accounted for as a single performance obligation which is satisfied by providing the right to use the Company's intellectual property over the initial term of the franchise agreement. Beginning in June 2018, the initial franchise or license agreement is for five years and contains two options to renew for an additional five years each (for a total term of 15 years). Prior to this change in 2018, the initial franchise agreement was for seven years and contained two options to renew for an additional seven years each (for a total term of 21 years). Each option to renew includes an additional fee and is considered a separate performance obligation.

The Company recognizes the initial franchise fee on a straight-line basis using a mid-month convention over the initial term of the franchise or license agreement starting with the opening of the location. The opening is considered to take place when the Company has performed substantially all of the initial services required in the franchise or license agreement and when the franchisee or licensee begins to benefit from the rights included in the franchise or license agreement. Incidental items that are immaterial in the context of the contract are recognized as expense.

Royalty Fee Revenue – Franchises are required to pay the Company a royalty fee based on a percentage of its gross sales, excluding sales tax, pre-approved coupons, and redemption of loyalty rewards. Revenue is recognized on a weekly basis based on the prior week's sales. A receivable is recorded at year end based on average sales per day for the week that spans year end. Royalty fees are due on a weekly basis.

Advertising Fund Fee Revenue – Franchises are also required to pay the Company ad fund fees based on a percentage of its gross sales, excluding sales tax, pre-approved coupons, and redemption of loyalty rewards. In return for these fees, the Company advertises on behalf of the brand as a whole. Franchises can also apply for reimbursement of general advertising expenses that they directly incur. Revenue is recognized on a weekly basis based on the prior week's sales. A receivable is recorded at year end based on average sales per day for the week that spans year end. The adoption of ASU No. 2014-09 did not result in a change to how advertising fee revenue is recognized. Advertising fund fees are due on a weekly basis.

December 31, 2024, 2023, and 2022

NOTE 2 – REVENUE RECOGNITION (CONTINUED)

Revenue recognition (continued)

Other Income – This category of income includes rebates from beverage vendors, design fees, additional training fees, management fees, and registration fees and sponsorships for the owners' convention. Income is recognized based on when the services are provided at an amount expected to be received in exchange for these services. In 2024, the Company signed a 5-year beverage sales and promotion agreement with a beverage provider which includes a rebate based on gallons/cases purchased. The rebate revenue is recognized when it is earned, based on the purchase of the products covered under this agreement. The contract also provided an initial rebate incentive of $15,000 which was received in 2024 and is to be recognized over the 5-year period. Therefore, as of December 31, 2024, $12,000 has been deferred to future years.

Disaggregation of revenue from contracts with customers

Revenue from performance obligations satisfied at a point in time consists of royalties, advertising fund fees, and other income. Each category of revenue has been segregated on the face of the statements of income and retained earnings.

Revenue from performance obligations satisfied over time consists of initial franchise fees. These fees are recognized on a straight-line basis using a mid-month convention over the initial term of the franchise agreement. This revenue is segregated on the face of the statements of income and retained earnings.

Various economic factors affect revenue and cashflows. Franchise bakeries are located in multiple states throughout the United States. The economic conditions within these states can vary from location to location. Management believes that with the exception of another worldwide health pandemic, the geographic diversification of its franchises mitigates the risk of significant negative impact due to world events.

The various revenue lines on the statement of income and retained earnings includes income from contracts with customers and from other sources. The income from contracts with customers is either earned at a point in time or over time.

Source: Item 21 — FINANCIAL STATEMENTS (FDD page 46)