For Cinnabon franchises, how are the revenues and expenses of the Ad Funds and Company-Managed Local Funds reflected in the consolidated statements of operations?

According to Cinnabon's 2025 Franchise Disclosure Document, the revenues and expenses of the Ad Funds and Company-Managed Local Funds are reflected in the consolidated statements of operations as Advertising funds revenues and Advertising funds expenses, respectively. When the cumulative revenues of the advertising funds exceed the related cumulative advertising expenses, Cinnabon accrues advertising costs up to the amount of the cumulative surplus.

Cinnabon distinguishes between Franchisee-Managed Local Funds and Company-Managed Local Funds. The billing, collection, and subsequent distribution of Franchisee-Managed Local Funds are recorded as pass-through transactions within Advertising funds assets and Advertising funds liabilities. This means that Cinnabon acts as an intermediary for these funds, and the transactions do not directly impact their revenue or expense statements.

In practical terms, this accounting treatment provides transparency into how advertising funds are managed and spent. Franchisees can see how their contributions to the Ad Funds and Company-Managed Local Funds are being used to promote the Cinnabon brand. The accrual of advertising costs when revenues exceed expenses ensures that funds are available for future marketing initiatives. The pass-through treatment of Franchisee-Managed Local Funds maintains a clear separation of these funds from Cinnabon's own revenues and expenses.