Under what conditions does Carbones Pizzeria recognize deferred revenue for area development agreements?

According to Carbones Pizzeria's 2025 Franchise Disclosure Document, development fees from area development agreements are initially recognized as deferred revenue when the area development agreement is executed. This means Carbones Pizzeria doesn't immediately count the fees as earned income.

Instead, the deferred revenue is recognized, or earned, over time. Specifically, Carbones Pizzeria recognizes this revenue pro-rata (proportionally) over the term of the area development agreement. However, there's a condition that can accelerate this recognition. If the franchisee fulfills the required number of franchises outlined in the area development agreement before the agreement's term ends, Carbones Pizzeria will recognize the remaining deferred revenue at that point.

In simpler terms, Carbones Pizzeria spreads out the recognition of development fees as revenue over the life of the agreement unless the franchisee meets their development quota early, in which case the remaining balance is recognized sooner. This accounting practice ensures that revenue recognition aligns with the actual delivery of the franchise rights and related services to the area developer.