What revenue sources does Burneys Sweets More derive from conventional franchised restaurants?
Burneys_Sweets_More Franchise · 2025 FDDAnswer from 2025 FDD Document
ognition
The Company's revenues consist of fees from franchised restaurants operated by conventional franchisees. Revenues from conventional franchised restaurants include royalties based on a percent of sales in additional to the recognized initial franchise fee amount. Financial Accounting Services Board issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606). This new guidance that went into effect January 1, 2019, establishes the principles to report useful information to users of financial statements about the nature, timing, and uncertainty of
DMG BURNEY, INC
revenue from contracts with customers. Topic 606 provides that revenues are to be recognized when control of promised goods or services is transferred to a customer in an amount that reflects the consideration expected to be received for those goods or services. The standard does not change the recognition of vendor rebates or royalties from restaurants operated by franchisees, which are based on a percent of sales and recognized at the time the underlying sales occur. The standard does change the timing in which the Company recognizes initial fees from franchisees for new restaurant openings and new franchise terms. The Company's accounting policy through December 31, 2018, was to recognize initial franchise fees when received, upon a new restaurant opening and at the start of a new franchise term. Beginning in January 2019, initial franchise fees have been to recognize a portion in the current as the Company satisfies the initial performance obligation and then an amount of revenue to be recognized over the franchise term, which is generally 10 years.
Source: Item 23 — RECEIPT (FDD pages 50–199)
What This Means (2025 FDD)
According to Burneys Sweets More's 2025 Franchise Disclosure Document, the company's revenues consist of fees from franchised restaurants operated by conventional franchisees. These revenues are primarily derived from two sources: royalties based on a percentage of sales and initial franchise fees.
The initial franchise fee is recognized differently based on accounting standards. Before January 1, 2019, Burneys Sweets More recognized initial franchise fees when received, upon a new restaurant opening, and at the start of a new franchise term. However, beginning in January 2019, the company recognizes a portion of the initial franchise fees in the current year as the company satisfies the initial performance obligation and then recognizes the remaining amount over the franchise term, which is generally 10 years.
This change in accounting policy was implemented due to the adoption of Financial Accounting Services Board Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606). This update establishes principles for reporting useful information to users of financial statements about the nature, timing, and uncertainty of revenue from contracts with customers. The standard does not change the recognition of vendor rebates or royalties from restaurants operated by franchisees, which are based on a percent of sales and recognized at the time the underlying sales occur.