What was the services revenue for Better Blend in the year ended December 31, 2023?
Better_Blend Franchise · 2024 FDDAnswer from 2024 FDD Document
NESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition (Continued)
The Company's revenue consists of fees from franchised restaurants operated by conventional franchisees. Revenue from conventional franchised restaurants include initial franchise fees, royalties based on percent of sales, marketing fees based on percent of sales, and development fees for locations the franchisee opens in addition to the initial location.
Royalties are collected on a weekly basis and are based on certain percentage as specified on the franchise agreement. Marketing fees are based on up to 1% of gross revenue. The marketing fund is used for marketing expenses related to maximizing public recognition of the Company's brand and marketing fund.
The initial franchise fees collected are determined on a franchisee-by-franchisee basis. The Company had ten franchisees under contract and four were operational as of December 31, 2023.
The Company had no contract assets and approximately $145,000 of contract liabilities as of December 31, 2022.
Advertising
The Company expenses advertising costs as incurred. Advertising expenses were approximately $50,000 for the years ended December 31, 2023.
NOTE 2 - DEFERRED REVENUE
Deferred revenue represents unearned revenue generated from the sale of new franchises and the approval of new franchisee locations.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 43)
What This Means (2024 FDD)
According to Better Blend's 2024 Franchise Disclosure Document, the company's revenue consists of fees from franchised restaurants operated by conventional franchisees. These revenues include initial franchise fees, royalties based on a percentage of sales, marketing fees based on a percentage of sales (up to 1% of gross revenue), and development fees for additional locations opened by franchisees. As of December 31, 2023, Better Blend had ten franchisees under contract, with four of them being operational.
For a prospective Better Blend franchisee, understanding the revenue streams is crucial. The initial franchise fees are determined on a franchisee-by-franchisee basis, so it's important to clarify the specific fee structure during the negotiation process. Royalties and marketing fees, being a percentage of sales, will directly impact the franchisee's profitability. The marketing fund, capped at 1% of gross revenue, is used to enhance the brand's public recognition.
It's also worth noting that Better Blend had $145,000 of contract liabilities as of December 31, 2022. Additionally, advertising expenses for the year ended December 31, 2023, amounted to approximately $50,000. Two customers represented 85% of total revenues and 69% of royalties and marketing fees receivable as of and for the year ended December 31, 2023. These figures provide insight into the company's financial activities and should be considered when evaluating the franchise opportunity.
However, the FDD does not explicitly state the total service revenue for the year ended December 31, 2023. A prospective franchisee should directly ask the franchisor for the total service revenue for that period to gain a clearer understanding of the company's financial performance.