What do the licensing fees for Buff City Soap include, and when are they recognized?
Buff_City_Soap Franchise · 2025 FDDAnswer from 2025 FDD Document
llocating the transaction price to the (in thousands)
performance obligations; and recognizing revenue when (or as) the entity satisfies a performance obligation.
Franchise and Other Revenue
Franchise and other revenue consist of franchise and development fees, royalty fees, marketing brand fund contributions, and other related revenue. Revenue is recognized as follows:
Franchise Fees, Development Fees, and Royalty Fees
The Company sells individual franchises as well as development agreements for the right to develop multiple Buff City Soap retail stores in designated areas. The franchise agreements and development agreements typically require the franchisee to pay initial nonrefundable fee and continuing fees, or royalty income, based upon a percentage of franchisee net sales.
Franchise and development fees consist primarily of revenues earned from the delivery of services to franchisees over the franchise license term. The Company enters into franchise and development agreements to provide franchisees with the use of the Company's intellectual property, technology support, training materials and services, marketing and distribution services, preopening assistance, site selection and operating assistance.
Source: Item 6 — , Securities Offering Fee, in the amount column is revised to state the following: (FDD pages 216–303)
What This Means (2025 FDD)
According to the 2025 FDD, Buff City Soap's franchise and development fees primarily consist of revenues earned from delivering services to franchisees throughout the franchise license term. These services include granting franchisees the right to use Buff City Soap's intellectual property, technology support, training materials, marketing and distribution services, preopening assistance, site selection, and ongoing operational support.
Buff City Soap recognizes revenue from franchise and development fees, royalty fees, marketing brand fund contributions, and other related revenue according to a five-step model. This model involves identifying the contract, outlining performance obligations, determining the transaction price, allocating the price to the obligations, and recognizing revenue as each obligation is fulfilled.
Buff City Soap enters into franchise and development agreements that typically require franchisees to pay an initial nonrefundable fee and continuing royalty fees based on a percentage of the franchisee's net sales. The franchise agreements related to the use of Franchising's intellectual property in the sale of Buff City Soap retail store branded products in specific territories and are recognized when earned.