What are the four sources of revenue for Bens Soft Pretzels?
Bens_Soft_Pretzels Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 46)
What This Means (2025 FDD)
According to the 2025 FDD, Bens Soft Pretzels Franchising Corporation generates revenue from four primary sources. These are initial franchise fees, royalty fees, advertising fund fees, and other income. This information is crucial for prospective franchisees to understand how the franchisor sustains its operations and supports its franchisees.
The initial franchise fee is collected when a new franchisee joins the Bens Soft Pretzels system. This fee grants the franchisee the right to operate a Bens Soft Pretzels location, use the brand's intellectual property, receive pre-opening training, and benefit from ongoing advertising and operational support. The FDD states that these services are bundled together and recognized as a single performance obligation fulfilled over the term of the franchise agreement.
Royalty fees are ongoing payments made by franchisees based on a percentage of their sales. Advertising fund fees contribute to the collective marketing efforts that promote the Bens Soft Pretzels brand. Lastly, "other income" may include revenue from various sources not directly related to franchise or royalty fees. Understanding the relative contribution of each revenue stream helps potential franchisees assess the financial stability and business model of Bens Soft Pretzels.