Upon what event does Canine Dimensions recognize $12,500 as revenue?
Canine_Dimensions Franchise · 2025 FDDAnswer from 2025 FDD Document
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Note 5 Franchise Revenue Recognition (Continued)
After assessing the recent guidance, the Company concludes the use of brand name and logo and ongoing access to the operating procedures manual as the core components of the franchise license. The Company further concludes the initial training services and territory fee are distinct performance obligations that are one-time in nature and completed upon such date that franchisee's training is completed.
Therefore, the Company concludes that the franchise agreement includes distinct performance obligations for the use of its brand name and logo, supported by marketing and other support services, for the life of each ten-year franchise agreement, while the obligations of the Company terminate for training services and territory fee upon the conclusion of the initial training.
As such the Company recognizes as revenue upon the completion of training $12,500. The balance of initial fees results in $35,000 ratably recognized over
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 35)
What This Means (2025 FDD)
According to Canine Dimensions' 2025 Franchise Disclosure Document, the company recognizes $12,500 as revenue upon the completion of the franchisee's training. Canine Dimensions considers the use of its brand name and logo, along with ongoing access to the operating procedures manual, as the core components of the franchise license. The initial training services and territory fee are viewed as distinct, one-time performance obligations that are fulfilled when the franchisee's training is completed.
Therefore, Canine Dimensions recognizes revenue for the use of its brand name and logo, supported by marketing and other support services, over the life of each ten-year franchise agreement. The obligations related to training services and the territory fee are considered complete once the initial training concludes. The remaining initial fees, amounting to $35,000, are recognized ratably over either the ten-year or five-year term of the franchise agreement.
For prospective franchisees, this means that while the initial franchise fee covers various elements, Canine Dimensions specifically allocates $12,500 to the training component. This portion is recognized as revenue by Canine Dimensions once the franchisee completes their training. The remaining portion of the initial fee is recognized over the term of the franchise agreement, reflecting the ongoing value provided through the brand, logo, and operational support. This revenue recognition method aligns with accounting standards that require companies to recognize revenue as they fulfill their obligations under the franchise agreement.