When are continuing fees recognized as earned by The C12 Group?
C12_Group Franchise · 2025 FDDAnswer from 2025 FDD Document
counting principles generally accepted in the United States (GAAP). The financial statements were presented on a consolidated basis and all significant intercompany accounts and transactions eliminated.
Revenue Recognition: A majority of the Company's revenues are derived from franchise fees. Franchise agreements generally require the franchisee to pay 1) an initial non-refundable territory fee of $25,000 per franchise unit, 2) a prepaid marketing deposit of $10,000, 3) a training and support fee of $10,000 to $12,500, which is refundable prior to the start of training, 4) continuing fees based upon a percentage of monthly member billings ranging from 12% to 30%, and 5) a new member registration fee ranging from $300-500. Franchise agreements are renewed annually with no additional charges.
When a franchise is sold, the Company agrees to provide certain services to the franchisee, including assisting with site selection, training, reference and promotional materials and assist
Source: Item 22 — CONTRACTS (FDD page 46)
What This Means (2025 FDD)
According to the 2025 C12 Group Franchise Disclosure Document, continuing fees are recognized as earned. These fees are based upon a percentage of monthly member billings, and they range from 12% to 30%.
This means that C12 Group recognizes the revenue from these fees as it is earned over time, rather than when the cash is received. This is a common accounting practice that aligns revenue recognition with the delivery of services or the passage of time. For a C12 Group franchisee, this implies that the franchisor's financial statements will reflect the ongoing revenue stream generated by these continuing fees as they are earned each month.
It is important to note that while the franchisee is responsible for invoicing and collecting registration and membership fees from their members, the franchisee must pay C12 Group royalty fees based on the membership roster and billings, regardless of whether the franchisee actually collects those fees from its members. This highlights the franchisee's responsibility to manage collections effectively to ensure they can meet their royalty obligations to C12 Group.