What was the revenue recognized over time for Bens Soft Pretzels?
Bens_Soft_Pretzels Franchise · 2025 FDDAnswer from 2025 FDD Document
ng 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.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 46)
What This Means (2025 FDD)
According to the 2025 FDD, Bens Soft Pretzels recognizes revenue from initial franchise fees over time. This is because the company's performance obligations, including the franchise license, pre-opening training, and ongoing support, are considered a single obligation fulfilled over the franchise agreement's term. The initial franchise fee is recognized on a straight-line basis, using a mid-month convention, starting when the location opens. The opening signifies when Bens Soft Pretzels has substantially completed the initial services and the franchisee benefits from the franchise rights.
The FDD also states that a portion of the initial franchise fee revenue is deferred to future periods. As of December 31, 2024, the deferred portion of this revenue totaled $332,002. The deferred revenue was $300,294 as of December 31, 2023, and $347,652 as of December 31, 2022. This deferral occurs because franchise fees are typically required upon signing the agreement, but the revenue recognition happens over the franchise term.
For a prospective franchisee, this means that Bens Soft Pretzels doesn't recognize all of the initial franchise fee as revenue immediately. Instead, it's spread out over the term of the agreement, which impacts the company's financial statements. The deferred revenue figures show how much of the initial fees collected have not yet been recognized as revenue. This accounting practice is common in franchising, as the franchisor provides ongoing services and support to the franchisee throughout the term of the agreement.