What activities are included in the 'pre-opening activities' for a Chocolate Fish Coffee franchise?
Chocolate_Fish_Coffee Franchise · 2024 FDDAnswer from 2024 FDD Document
The Company's primarily performance obligation under the franchise agreement mainly includes granting certain rights to access the Company's intellectual property and a variety of activities relating to opening a franchise unit, including initial training and other such activities commonly referred to collectively as "pre-opening activities", which are recognized as a single performance obligation. The Company expects that certain pre-opening activities provided to the franchisee will not be brand specific and will provide the franchisee with relevant general business information that is separate and distinct from the operation of a company-branded franchise unit. The portion of pre-opening activities that will be provided that is not brand specific is expected to be distinct as it will provide a benefit to the franchisee and is expected not to be highly interrelated or interdependent to the access of the Company's intellectual property, and therefore will be accounted for as a separate distinct performance obligation. All other pre-opening activities are expected to be highly interrelated and interdependent to the access of the Company's intellectual property and therefore will be accounted for as a single performance obligation, which is satisfied by granting certain rights to access the Company's intellectual property over the term of each franchise agreement.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 41)
What This Means (2024 FDD)
According to the 2024 Chocolate Fish Coffee Franchise Disclosure Document, pre-opening activities include initial training and other activities related to opening a franchise unit. These activities are considered a single performance obligation under the franchise agreement.
Specifically, Chocolate Fish Coffee distinguishes between pre-opening activities that are brand-specific and those that are not. The non-brand-specific activities provide franchisees with general business information separate from the operation of a Chocolate Fish Coffee branded unit. These activities are accounted for as a separate performance obligation because they benefit the franchisee and are not highly interrelated or interdependent with access to Chocolate Fish Coffee's intellectual property.
All other pre-opening activities are considered highly interrelated and interdependent with access to Chocolate Fish Coffee's intellectual property. These activities are accounted for as a single performance obligation, which is satisfied by granting certain rights to access the company's intellectual property over the term of each franchise agreement.