What was the range of franchise fees collected by Bens Soft Pretzels?
Bens_Soft_Pretzels Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 46)
What This Means (2025 FDD)
Based on the 2025 Franchise Disclosure Document, the financial statements provide details on how Ben's Soft Pretzels recognizes revenue from initial franchise fees but does not disclose the specific range of initial franchise fees collected during the reported periods. The document explains that Ben's Soft Pretzels enters into franchise agreements granting franchisees the right to operate locations in exchange for an initial franchise fee. The company's obligations include the franchise license, pre-opening training, and ongoing support.
The FDD states that Ben's Soft Pretzels recognizes the initial franchise fee revenue on a straight-line basis over the initial term of the franchise agreement, starting when the location opens. This means the revenue is recognized gradually over the life of the agreement rather than all at once upon signing. The initial franchise agreement is for five years with two additional five-year renewal options.
Although the financial statements do not explicitly state the range of franchise fees collected, they do mention that franchise fees are typically required upon signing the agreement. However, Ben's Soft Pretzels may allow franchise owners to pay over time, recording a receivable for the unpaid portion. The deferred portion of initial franchise fee revenue totaled $332,002 as of December 31, 2024.
To determine the range of franchise fees, a prospective franchisee should review Item 5 of the 2025 FDD, which outlines the fees a franchisee must pay. If this information is not present, the prospective franchisee should directly ask Ben's Soft Pretzels for the specific range of initial franchise fees charged to new franchisees.