Does Carbones Pizzeria consider the initial and renewal franchise fees to be interrelated?
Carbones_Pizzeria Franchise · 2025 FDDAnswer from 2025 FDD Document
When an individual franchise is sold, the Company agrees to provide certain services to the franchisee. Generally, these services include assistance in site selection, training personnel, implementation of an accounting system, and design of a quality control program. The Company's initial and renewal franchise fees are considered highly dependent upon and interrelated with the franchise right granted in the franchise agreement. As such, these franchise fees are recognized over the contractual term of the franchise agreement. The contract term for the initial franchise agreements is 10 years commencing on the earlier of the date when the restaurant opens or twelve months following the date the franchise agreement was signed.
Source: Item 22 — CONTRACTS (FDD page 30)
What This Means (2025 FDD)
According to Carbones Pizzeria's 2025 Franchise Disclosure Document, the initial and renewal franchise fees are considered highly dependent upon and interrelated with the franchise right granted in the franchise agreement. This means that Carbones Pizzeria views the services they provide to franchisees, such as site selection assistance, training, accounting system implementation, and quality control program design, as integral to the franchise right itself.
This interrelation has significant implications for how Carbones Pizzeria recognizes revenue from these fees. Instead of recognizing the full amount of the initial and renewal franchise fees immediately, Carbones Pizzeria recognizes these fees over the contractual term of the franchise agreement.
For a Carbones Pizzeria franchisee, this accounting practice means that the franchisor recognizes the revenue associated with your franchise fees gradually over the 10-year term. This approach is tied to the ongoing services and support Carbones Pizzeria provides, linking the fees directly to the value and duration of the franchise agreement.