When does Bevaris Alliance recognize the initial franchise fee as revenue?
Bevaris_Alliance Franchise · 2024 FDDAnswer from 2024 FDD Document
States of America.
Cash consists of cash and money market funds which are considered to be cash or cash equivalents.
Deferred Franchise Development Costs. Costs incurred in connection with the development of the franchise concept, offering documents and operations manuals have been deferred. The costs are being amortized using the straight-line method over the 5-year estimated useful life of the asset. Such amortization will begin when franchise sales commence.
Initial franchise fees and royalties. Initial franchise fee is recognized when the obligations required by the franchise agreement has been substantially performed by the Company which is when the franchisee begins operating the franchised business. Initial franchise fees is $5,000 for the first franchise, $3,750 for the second franchise and $
Source: Item 23 — RECEIPT (FDD pages 22–88)
What This Means (2024 FDD)
According to Bevaris Alliance's 2024 Franchise Disclosure Document, the initial franchise fee is recognized as revenue when the company has substantially performed its obligations under the franchise agreement, which occurs when the franchisee begins operating their Bevaris Alliance franchised business.
These obligations include site selection, providing operations manuals and marketing plans, offering a company-sponsored internet site, initial training, and other services necessary for the franchisee to commence operations. The initial franchise fee is $5,000 for the first franchise, $3,750 for the second, and $2,500 for each subsequent franchise.
Bevaris Alliance has elected to treat the pre-opening services provided to franchisees as a single performance obligation, in accordance with ASC 952-606-25-2. This means that instead of recognizing revenue piecemeal as each service is delivered, Bevaris Alliance recognizes the entire initial franchise fee as revenue once all pre-opening obligations are substantially completed and the franchisee commences operations.