When does Cinnabon begin recognizing franchise fees as revenue for a specific franchise agreement?

According to Cinnabon's 2025 Franchise Disclosure Document, franchise fees are initially recorded as deferred revenue upon receipt. Cinnabon then recognizes this revenue on a straight-line basis over the term of the franchise agreement. This revenue recognition commences specifically when the Cinnabon store, referred to as the SBR (presumably standing for 'store business revenue'), is opened.

This means that Cinnabon does not immediately recognize the franchise fee as income when it's paid. Instead, it spreads the recognition of the revenue over the life of the franchise agreement, which is a common accounting practice. The start of this revenue recognition is tied to the opening of the franchisee's store, aligning the revenue with the franchisee's operational period.

For a prospective Cinnabon franchisee, this accounting practice has implications for understanding Cinnabon's financial statements. The deferred revenue represents an obligation Cinnabon has to provide the franchise rights and support over the term of the agreement. The franchisee should be aware that Cinnabon's reported revenue in any given period will reflect only a portion of the initial franchise fees collected, as the remainder is recognized over time.