When are deferred commissions for Carbones Pizzeria franchise sales recorded?

According to Carbones Pizzeria's 2025 Franchise Disclosure Document, deferred commissions for the sales of franchises are recorded at the time of the sale. These commissions are then recognized as commission expenses over the term of the franchise agreement.

For a prospective Carbones Pizzeria franchisee, this accounting practice means that the franchisor recognizes the commission expense related to the franchise sale over the entire period of the franchise agreement, rather than all at once. This approach aligns the expense recognition with the period during which the franchisee is operating and generating revenue under the Carbones Pizzeria brand.

This accounting method is a standard practice in the franchise industry, as it provides a more accurate representation of the financial performance of the franchise system over time. It also ensures that the franchisor's financial statements reflect the ongoing relationship and support provided to the franchisee throughout the term of the agreement.