Are the initial and renewal franchise fees for Carbones Pizzeria 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. During that time the franchisee is allowed to use the Carbone's Pizzeria name and menu. When the franchise agreement expires, the franchise may pay an additional franchise fee to renew the agreement. The contract term for franchise renewal agreements is 10 years.
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 interrelated. Specifically, the FDD states that when Carbones Pizzeria sells an individual franchise, they agree to provide services such as site selection assistance, personnel training, accounting system implementation, and quality control program design.
Because of these services, Carbones Pizzeria considers the initial and renewal franchise fees to be highly dependent upon and interrelated with the franchise right granted in the franchise agreement. As a result, Carbones Pizzeria recognizes these franchise fees over the contractual term of the franchise agreement.
The initial franchise agreement lasts for 10 years, starting either when the restaurant opens or 12 months after the franchise agreement is signed, whichever comes first. During this time, the franchisee can use the Carbone's Pizzeria name and menu. When the agreement ends, the franchisee can pay another franchise fee to renew the agreement for another 10 years.