When are upfront franchise fees typically billed and paid for a Chesters franchise?
Chesters Franchise · 2025 FDDAnswer from 2025 FDD Document
the accompanying statements of income and members' equity.
Franchise Fees
Franchise agreements typically require an upfront franchise fee paid upon the opening of a store. Upfront franchise fees are typically billed and paid when a new franchise agreement becomes effective. The Company has determined that the services provided in exchange for upfront franchise fees, which primarily relate to preopening support, are distinct from the ongoing services provided to franchisees and have adopted the practical expedient to allow treatment of certain preopening services to be distin
Source: Item 21 — **FINANCIAL STATEMENTS (FDD page 48)
What This Means (2025 FDD)
According to Chesters's 2025 Franchise Disclosure Document, upfront franchise fees are typically billed and paid when a new franchise agreement becomes effective. These fees are required by the franchise agreement upon the opening of a store. Chesters recognizes these fees upon the opening of the franchise.
These upfront fees compensate Chesters for services primarily related to pre-opening support, which are considered distinct from the ongoing services provided to franchisees. This distinction is important for accounting purposes, as it affects how and when Chesters recognizes revenue related to these fees.
For a prospective franchisee, this means that the initial franchise fee will be due when the franchise agreement is signed and becomes effective. This fee is associated with the pre-opening support and services provided by Chesters to help the franchisee establish their business. Understanding the timing of this payment is crucial for financial planning when considering a Chesters franchise.