How does Bonchon recognize revenue from initial and renewal franchise fees that are allocated to the right to access the company's intellectual property?
Bonchon Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company's primary performance obligation under the franchise agreement mainly includes granting certain rights to access the Company's intellectual property and a variety of activities relating to opening a franchise unit, including site selection, training and other such activities commonly referred to collectively as "pre-opening activities." The Company has determined that certain training provided to the franchisee is not brand specific and provides the franchisee with relevant general business information that is separate and distinct from the operation of a company-branded franchise unit. The portion of training services provided that is not brand specific is deemed to be distinct as it provides a benefit to the franchisee and is not highly interrelated or
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue recognition (continued)
Franchise fees and royalties (continued)
accounted for as a separate distinct performance obligation. All other pre-opening activities have been determined to be highly interrelated and interdependent to the access of the Company's intellectual property and therefore are accounted for as a single performance obligation, which is satisfied by granting certain rights to access our intellectual property over the term of each franchise agreement.
Source: Item 23 — RECEIPTS (FDD pages 92–536)
What This Means (2025 FDD)
According to Bonchon's 2025 Franchise Disclosure Document, the company's primary performance obligation under the franchise agreement includes granting certain rights to access the company's intellectual property. This also includes a variety of activities relating to opening a franchise unit, such as site selection, training, and other pre-opening activities. Bonchon recognizes revenue from initial and renewal franchise fees by granting rights to access their intellectual property over the term of the franchise agreement.
Bonchon has determined that certain training provided to the franchisee is not brand specific and provides the franchisee with relevant general business information that is separate and distinct from the operation of a company-branded franchise unit. The portion of training services provided that is not brand specific is deemed to be distinct as it provides a benefit to the franchisee and is not highly interrelated or accounted for as a separate distinct performance obligation.
All other pre-opening activities have been determined to be highly interrelated and interdependent to the access of Bonchon's intellectual property and therefore are accounted for as a single performance obligation. This obligation is satisfied by granting certain rights to access their intellectual property over the term of each franchise agreement.