What was the total revenue from Carls franchised restaurants and other sources, as reported in the financial statement?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
| Carl's Jr. Restaurants LLC | Carl's Jr. FundingLLC | Carl's Jr. SPY Guarantor LLC | Hardee's Restaurants LLC | Hardee's FundingLLC | Hardee's SPY Guarantor LLC | Eliminations | The CKE Securitization Entities | |
|---|---|---|---|---|---|---|---|---|
| Revenue: | ||||||||
| Company-operated restaurants $ | 111 ,433 | $ | $ | $ 242,820 | $ | $ | $ | 354,253 $ |
| Franchised restaurants and other | 168,244 | 5,579 | 122,587 | 11,835 | (17,414) | 290,831 | ||
| Total revenue | 279,677 | 5,579 | 365,407 | 11 ,835 | (17,414) | 645,084 |
Revenue Recognition
Company-operated restaurants revenue is recognized upon the sale of food or beverage to a customer in the restaurant, which is when our obligation to perform is satisfied.
Franchised restaurants and other revenue includes royalties, franchise fees, and rent revenue. Royalties from franchised restaurants are based on a percentage of net sales of the franchised restaurant and are recognized as earned. Royalties are typically billed and paid monthly and are usually 4% to 5% per restaurant. Franchise development and commitment fees are deferred when received, allocated to each agreed upon restaurant, and recognized as revenue over the contractual term of each respective franchise agreement, once the restaurant has opened. Initial franchise fees, training fees, renewal fees and transfer fees are recognized as revenue over the contractual term of the franchise agreements, once the restaurant has opened. Upfront franchise fees are typically billed and paid when a new franchise agreement becomes effective or when an existing agreement is transferred to another franchisee. These franchise fees are considered highly dependent upon and interrelated with the franchise right granted in the franchise agreement. Further, franchise fees are forfeited and recognized as revenue upon the termination o
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 79–80)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, the financial statement includes revenue figures for 'Franchised restaurants and other' sources. For Carl's Jr. Restaurants LLC, this revenue was reported as $168,244. Carl's Jr. Funding LLC reported $5,579. Hardee's Restaurants LLC reported $122,587, and Hardee's Funding LLC reported $11,835. After eliminations of ($17,414), the total revenue from franchised restaurants and other sources was $290,831 for The CKE Securitization Entities.
These figures represent the income Carls receives from its franchise operations, including royalties, franchise fees, and other related revenue streams. For a prospective franchisee, this indicates the financial health and revenue-generating capability of the franchise system as a whole. It's important to note that these figures do not represent the revenue of individual franchised restaurants, but rather the revenue Carls collects from its franchisees and related activities.
The FDD also clarifies how Carls recognizes revenue. Royalties from franchised restaurants, which are a percentage of net sales (typically 4% to 5%), are recognized as earned. Franchise development and commitment fees are deferred and recognized over the contractual term of the franchise agreement once the restaurant opens. Initial franchise fees, training fees, renewal fees, and transfer fees are also recognized over the term of the franchise agreement after the restaurant opens. Upfront franchise fees are billed and paid when a new agreement is effective or an existing agreement is transferred.
Understanding these revenue recognition policies is crucial for franchisees as it provides insight into how Carls accounts for and reports its financial performance. Prospective franchisees should carefully review the financial statements and revenue recognition policies in the FDD to fully understand the financial dynamics of the Carls franchise system.