How does Big Apple Bagels estimate royalty revenue when actual numbers have not been received from franchisees?
Big_Apple_Bagels Franchise · 2025 FDDAnswer from 2025 FDD Document
Royalty fees from franchised stores represent a 5% fee on net retail and wholesale sales of franchised units. Royalty revenues are recognized on an accrual basis using actual franchise receipts. Generally, franchisees report and remit royalties on a weekly basis. The majority of month-end receipts are recorded on an accrual basis based on actual numbers from reports received from franchisees shortly after the month-end. Estimates are utilized in certain instances where actual numbers have not been received and such estimates are based on the average of the last 10 weeks' actual reported sales.
Source: Item 23 — RECEIPTS (FDD pages 87–319)
What This Means (2025 FDD)
According to Big Apple Bagels' 2025 Franchise Disclosure Document, royalty fees are 5% of net retail and wholesale sales from franchised units. Big Apple Bagels typically recognizes royalty revenues on an accrual basis, relying on actual franchise receipts. Franchisees generally report and remit these royalties weekly.
For month-end accounting, Big Apple Bagels primarily uses actual numbers from franchisee reports received shortly after the month's end. However, in situations where actual sales figures are not promptly available from franchisees, Big Apple Bagels uses an estimation method to recognize royalty revenue.
In these instances, Big Apple Bagels estimates royalty revenue based on the average of the last 10 weeks' actual reported sales. This approach allows Big Apple Bagels to maintain consistent revenue recognition, even when facing delays in receiving sales data from certain franchisees.