How does Brightstar Care recognize revenue from royalty fees paid by franchisees?
Brightstar_Care Franchise · 2025 FDDAnswer from 2025 FDD Document
The standard specifically identifies franchise rights as an example of a symbolic license. This type of license is satisfied over time since the customer simultaneously receives and consumes the benefit as the entity performs its obligation to provide access and, therefore, meets the criterion of recognizing revenue over time. Royalty fees represent the majority of consideration the Company receives under franchise agreements and are recognized over time at the greater of the actual royalty earned or the contract monthly minimum each month.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 117)
What This Means (2025 FDD)
According to Brightstar Care's 2025 Franchise Disclosure Document, the company recognizes revenue from royalty fees over time. The FDD states that franchise rights are considered a symbolic license, which means that Brightstar Care recognizes revenue as the franchisee simultaneously receives and consumes the benefits of the franchise.
Brightstar Care receives weekly royalty payments based on a percentage of each franchisee's prior month's net billings. The franchisee is required to meet a certain minimum revenue level for the payment of these royalty fees in any given month, effective two years after the opening date. The royalty fees represent the majority of the consideration Brightstar Care receives under the franchise agreements.
Specifically, Brightstar Care recognizes royalty fees at the greater of the actual royalty earned or the contract monthly minimum each month. This means that even if a franchisee's billings are low in a particular month, Brightstar Care will still recognize revenue based on the minimum royalty payment required by the franchise agreement. This revenue recognition method is consistent with the principle of recognizing revenue over time as the services are provided.