How does Better Homes And Gardens Real Estate disaggregate its revenue?
Better_Homes_And_Gardens_Real_Estate Franchise · 2025 FDDAnswer from 2025 FDD Document
- (a) Gross commission income at Owned Brokerage Group is recognized at a point in time at the closing of a homesale transaction.
- (b) Service revenue primarily consists of title and escrow fees at Title Group and are recognized at a point in time at the closing of a homesale transaction. Service revenue at Franchise Group includes relocation fees, which are recognized as revenue when or as the related performance obligation is satisfied dependent on the type of service performed, and fees related to leads and related services, which are recognized at a point in time at the closing of a homesale transaction or at the completion of the related service.
- (c) Franchise fees at Franchise Group primarily include domestic royalties which are recognized at a point in time when the underlying franchisee revenue is earned (upon close of the homesale transaction).
- (d) Other revenue is comprised of brand marketing funds received from franchisees at Franchise Group and other miscellaneous revenues across all of the business segments.
The Company's revenue streams are discussed further below by business segment:
Franchise Group
Domestic Franchisees
In the U.S., the Company employs a direct franchising model whereby it franchises its real estate brands to real estate brokerage businesses that are independently owned and operated. Franchise revenue principally consists of royalty and marketing fees from the Company's franchisees. The royalty received is primarily based on a gross percentage of the franchisee's gross commission income. Royalty fees are recorded as the underlying franchisee revenue is earned (upon close of the homesale transaction). Annual volume incentives given to certain franchisees on royalty fees are recorded as a reduction to revenue and are accrued for in relative proportion to the recognition of the underlying gross franchise revenue. Other sales incentives are generally recorded as a reduction to revenue ratably over the related performance period or from the date of issuance through the remaining life of the related franchise agreement. Franchise revenue also includes domestic initial franchise fees which are generally non-refundable and recognized by the Company as revenue upon the execution or opening of a new franchisee office to cover the upfront costs associated with opening the franchisee for business under one of Anywhere's brands.
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 75–76)
What This Means (2025 FDD)
According to Better Homes And Gardens Real Estate's 2025 Franchise Disclosure Document, the company reports its operations in three business segments: Franchise Group, Owned Brokerage Group, and Title Group. The Franchise Group focuses on franchising brokerage brands, collecting royalties and marketing fees from franchisees, primarily based on a percentage of the franchisee's gross commission income. The Owned Brokerage Group operates real estate brokerages, earning revenue as gross commission income at the closing of real estate transactions. The Title Group provides title, escrow, and settlement services, recording revenues at the time a homesale transaction or refinancing closes.
Within the Franchise Group, Better Homes And Gardens Real Estate distinguishes between domestic and international franchisees. For domestic franchisees, revenue mainly comes from royalty and marketing fees, with royalties recorded as the franchisee earns revenue. International franchisees operate under direct or master franchise models, with revenue derived from initial area development fees (ADF) and ongoing royalties. ADFs are recognized over the life of the franchise agreement, and royalties are a percentage of those received by the master franchisor.
Better Homes And Gardens Real Estate recognizes revenue differently based on the type of service and business segment. Gross commission income from the Owned Brokerage Group is recognized at the point of closing a homesale transaction. Service revenue from the Title Group, consisting of title and escrow fees, is also recognized at the closing of a homesale transaction. In the Franchise Group, service revenue includes relocation fees recognized as the performance obligation is satisfied and fees related to leads, recognized upon the closing of a homesale or completion of the service. Initial franchise fees are recognized upon the execution or opening of a new franchisee office.
For a prospective Better Homes And Gardens Real Estate franchisee, understanding these revenue streams is crucial. Franchisees need to be aware of how royalties and marketing fees are calculated and when they are due. The distinction between domestic and international franchise models also impacts revenue recognition and fee structures. Additionally, the timing of revenue recognition for different services, such as relocation fees and lead generation, affects financial planning and reporting for franchisees.