According to Buildingstars, when does the company recognize revenue?
Buildingstars Franchise · 2025 FDDAnswer from 2025 FDD Document
the transaction price to the performance obligation, and (5) recognition of revenue when or as the Company satisfies each performance obligation.
Accounts receivable from contracts with customers were $3,264,125, $3,857,717, $3,666,318, and $4,858,741 at December 31, 2024, 2023, 2022, and 2021, respectively.
Janitorial Services
The Company's primary source (90%) of revenue consists of janitorial services and sales of janitorial supplies. Revenue from services is recognized when the services are performed and supply and equipment sales when the products are delivered. Customers are billed monthly for services and supplies, if applicable, and generally have payment terms of 15 days. Payment terms may vary by the type and location of our customer. The term between invoicing and when payment is due is not significant and is less than one year.
Individual Franchises
Franchise revenue consists principally of continuing monthly fees based upon the franchisee's customer-level revenue. Franchise revenue also includes initial fees resulting from the sale of a franchise, finder fees for new accounts, and administrative fees. Revenue from sales of individual franchises is generally recognized when services to be provided by the Company have been performed over time. The unit franchise contract is for one to five years with a renewal option. The Company recognizes initial franchise fees when the franchisee has started the account. The Company-owned Master Franchise is obligated to offer the franchisee a minimum annual revenue base and on-going training and support. The Company-owned Master Franchise obtains customers under janitorial contracts and assigns them to the franchisees. The Company-owned Master Franchise also provides the franchisees with monthly billing and collection services on the assigned janitorial customers.
The Company-owned Master Franchise remits payments to the franchisee based upon the prior month's billings after deducting the franchise service fees of 10% to 30%, any financing payments due, and other incidental expenses. The net remittances are included in cost of sales in the consolidated financial statements. Total initial franchise fees, included in franchise revenue in the consolidated statements of income, totaled $426,797, $399,863, and $219,365 for the years ended December 31, 2024, 2023 and 2022 respectively.
Master Franchises
Revenue from master franchises consist of initial master franchise fee, royalties and franchise sales fees, and revenue from other services provided to the master franchisees.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024, 2023 and 2022
NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue (Continued)
Master Franchises (Continued)
The master franchise contract is for 20 years with a renewal option of 10 years.
Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 34–43)
What This Means (2025 FDD)
According to Buildingstars' 2025 Franchise Disclosure Document, the company recognizes revenue from different sources at different times. For janitorial services and sales of janitorial supplies, which constitute 90% of their revenue, Buildingstars recognizes revenue when the services are performed and when the products are delivered. Customers are typically billed monthly with payment terms of 15 days, although these terms can vary.
For individual franchises, Buildingstars recognizes revenue from franchise sales when the services to be provided by the company have been performed over time, and initial franchise fees are recognized when the franchisee has started the account. The unit franchise contract lasts one to five years with a renewal option. The company-owned Master Franchise is obligated to offer the franchisee a minimum annual revenue base and on-going training and support. The Company-owned Master Franchise obtains customers under janitorial contracts and assigns them to the franchisees and also provides the franchisees with monthly billing and collection services on the assigned janitorial customers.
For master franchises, Buildingstars recognizes initial master franchise fees upon the execution of the master franchise agreement. Royalties and franchise sales fees, which are based on a percentage of certain monthly revenue categories, are recognized in the month they are earned, subject to annual minimum fees. The master franchise contract is for 20 years with a renewal option of 10 years. Understanding these revenue recognition policies is crucial for prospective franchisees to assess the financial stability and practices of Buildingstars.