What is the range of franchise royalties and advertising fund contributions that Bumble Roofing collects from its franchisees?
Bumble_Roofing Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company collects royalties and advertising fund contributions ranging from 1.5% to 6.5% of a franchisee's monthly revenues. Royalties and advertising fund contributions are considered variable consideration. GAAP requires variable consideration that is to be recognized over the term of the franchise agreement to be estimated at the inception of the Franchise Agreement. Deferred revenue and a receivable would normally be recognized at the inception of the Franchise Agreement based on this estimate; however, given the nature of the business, the constraints associated with estimating these fees cannot be overcome in order to determine an estimate of the variable consideration that would not be likely to result in a significant reversal. Accordingly, as allowed by GAAP, these fees are recognized in the month in which services are performed for customers.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 53)
What This Means (2025 FDD)
According to Bumble Roofing's 2025 Franchise Disclosure Document, the company collects royalties and advertising fund contributions that range from 1.5% to 6.5% of a franchisee's monthly revenues. These payments are considered variable consideration according to Generally Accepted Accounting Principles (GAAP).
GAAP mandates that variable consideration, which is recognized over the term of the franchise agreement, must be estimated at the beginning of the agreement. Typically, this would involve recognizing deferred revenue and a receivable upfront based on this estimate. However, Bumble Roofing states that due to the nature of its business, it cannot accurately estimate these fees in advance without risking significant reversals later on.
Therefore, as permitted by GAAP, Bumble Roofing recognizes these royalties and advertising fund contributions in the month when services are actually performed for customers. This means that a franchisee's royalty and advertising fund obligations will fluctuate each month depending on their revenue, falling within the stated 1.5% to 6.5% range.