How are deferred commissions for sales of Carbones Pizzeria franchises recognized?

According to the 2025 Carbones Pizzeria 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 commission expenses related to franchise sales are not fully recognized immediately. Instead, they are spread out over the life of the franchise agreement. This approach aligns the expense recognition with the period during which the franchise is operating and generating revenue.

This method of recognizing deferred commissions provides a more accurate representation of the financial performance of Carbones Pizzeria over time, as it matches the commission expenses with the revenue generated by the franchises sold. It also reflects the ongoing support and services that the franchisor provides to the franchisee throughout the term of the agreement.