What was the royalty revenue for Carls franchised restaurants in the provided financial statement?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
918 (596,389)Members' equity (deficit). (251,817)549.532 53,279 780,753 1.971 (88.272)1,297,263 Total liabilities and members' equity deficit
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THE CKE SECURITIZA TION ENTITIES COMBINING CONSOLIDATING STATEMENT OF OPERATIONS (In thousands)
| | Carl's Jr
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 79–80)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, the revenue from franchised restaurants and other sources for Carl's Jr. Restaurants LLC was $168,244. For Hardee's Restaurants LLC, the revenue from franchised restaurants and other sources was $122,587. The Carl's Jr. Funding LLC revenue from franchised restaurants and other was $5,579, while Hardee's Funding LLC had $11,835. After eliminations of $17,414, the total revenue from franchised restaurants and other sources was $290,831 for The CKE Securitization Entities.
This revenue includes royalties, franchise fees, and rent revenue. Royalties from Carls franchised restaurants are based on a percentage of net sales, typically between 4% to 5%, and are recognized as earned. These royalties are usually billed and paid monthly.
For a prospective Carls franchisee, understanding how these revenues are generated and recognized is crucial. The consistent monthly billing and payment of royalties, based on a percentage of net sales, provides a predictable revenue stream for Carls. However, franchisees should be aware that the financial health of the franchisees can impact the accounts receivable for royalties, franchise fees, and rent. Carls mitigates this risk through a large number of franchisees and the short-term nature of the receivables.
Carls also has measures in place to address potential losses on receivables, such as reducing or deferring royalties or rent, or even acquiring the restaurants or terminating the franchise agreement if necessary. This indicates that Carls actively manages its franchise operations and credit risk to maintain a stable revenue stream.