For Checkersrallys, when are transfer fees recognized as revenue?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchise fees and area development fees are considered highly dependent upon and interrelated with the franchise right granted in the franchise agreement. Transfer fees are fees for selecting pre-approved buyers for franchisee-to-franchisee sales of restaurants. The transfer fees are paid by the new franchisee, deferred when received, and recognized as revenue over the contractual term of the new franchise agreement.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, transfer fees are fees paid by the new franchisee for selecting pre-approved buyers for franchisee-to-franchisee sales of restaurants. Checkersrallys defers the recognition of transfer fees when they are received. These fees are then recognized as revenue over the contractual term of the new franchise agreement.
This means that Checkersrallys does not recognize the entire transfer fee as revenue immediately upon receipt. Instead, they spread the revenue recognition over the life of the franchise agreement. This accounting practice aligns the revenue with the ongoing obligation to support the franchisee.
For a prospective Checkersrallys franchisee, this deferred recognition of transfer fees is important because it impacts Checkersrallys's financial statements. It also reflects the ongoing relationship and support provided to franchisees throughout the term of their agreement.