How does Carvel recognize ice cream mix revenues from franchisees?

According to Carvel's 2025 Franchise Disclosure Document, certain franchisees are required to purchase ice cream mix from Carvel's approved distributors. These distributors, in turn, obtain the ice cream mix from Carvel's approved manufacturers. Carvel recognizes ice cream mix revenues upon the sale of the ice cream mix. This recognition is based on the specific agreements Carvel has with its manufacturers, distributors, and franchisees.

For a prospective franchisee, this means that Carvel generates revenue from the sale of ice cream mix to franchisees through a network of approved distributors and manufacturers. The revenue recognition is tied directly to the sale of the mix, indicating that Carvel accounts for this revenue at a specific point in time rather than over a period. This arrangement ensures that Carvel maintains control over the quality and supply chain of its key ingredients, while also generating revenue from these sales.

This practice is fairly common in franchise systems within the food and beverage industry, where franchisors often mandate the purchase of proprietary ingredients or supplies from approved sources to maintain consistency and quality across all locations. For a Carvel franchisee, this requirement ensures that they are using the correct ice cream mix as defined in the franchise agreement, but it also means they must adhere to Carvel's supply chain and pricing, which may impact their cost of goods sold and overall profitability.