When are royalties and advertising fund fees collected from Bens Soft Pretzels bakeries?
Bens_Soft_Pretzels Franchise · 2025 FDDAnswer from 2025 FDD Document
Performance obligations related to royalties, advertising fund fees, and other income, are satisfied at a point in time which signifies when the revenue is earned and recognized. Royalties and advertising fund fees are collected weekly from the bakeries.
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.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 46)
What This Means (2025 FDD)
According to the 2025 FDD, Bens Soft Pretzels collects both royalty fees and advertising fund fees on a weekly basis from its franchise bakeries. These fees are based on a percentage of each bakery's gross sales, excluding sales tax, pre-approved coupons, and redemption of loyalty rewards.
Bens Soft Pretzels recognizes the revenue from these fees at a point in time, specifically when it is earned. This means that the revenue is recorded when the sale occurs at the bakery. The FDD also mentions that a receivable is recorded at year-end for any royalties and advertising fund fees that have been earned but not yet received. This indicates that while the fees are due weekly, there might be instances where payment is slightly delayed, necessitating the recording of a receivable.
For a prospective franchisee, this weekly collection of royalties and advertising fees means that cash flow management is crucial. Franchisees need to ensure they allocate a portion of their weekly sales to cover these fees. The consistent, recurring nature of these payments also highlights the importance of accurate sales tracking and reporting to Bens Soft Pretzels. Franchisees should also be aware that any delays in payment could result in the franchisor recording a receivable, potentially impacting their financial standing with the company.