When are Bft's development fees and franchise fees generally recognized as revenue?
Bft Franchise · 2025 FDDAnswer from 2025 FDD Document
s its promise to grant the franchisee the rights to access and benefit from the Company's intellectual property and to support and maintain the intellectual property.
The Company may enter into an area development agreement with certain franchisees. Area development agreements are for a territory in which a developer has agreed to develop and operate a certain number of franchise locations over a stipulated period of time. The related territory is unavailable to any other party and is no longer marketed to future franchisees by the Company. Depending on the number of studios purchased under franchise agreements or area development agreements, the initial franchise fee ranges from $60 (single studio) to $350 (ten studios) and is paid to the Company when a franchisee signs the area development agreement. Area development fees are initially recorded as deferred revenue. The development fees are allocated to the number of studios purchased under the development agreement.
Source: Item 23 — RECEIPTS (FDD pages 79–265)
What This Means (2025 FDD)
According to Bft's 2025 Franchise Disclosure Document, development fees and franchise fees are generally recognized as revenue upon the termination of the development agreement with the franchisee.
For area development agreements, Bft initially records area development fees as deferred revenue. These fees are allocated to the number of studios purchased under the development agreement. The revenue is then recognized on a straight-line basis over the franchise life for each studio under the development agreement.
Initial franchise fees are non-refundable and typically collected upon signing the franchise agreement. Bft records these initial franchise fees as deferred revenue when received and recognizes them on a straight-line basis over the franchise life, which they have determined to be ten years. This aligns with Bft fulfilling its promise to grant the franchisee rights to access and benefit from their intellectual property and to support and maintain that intellectual property.