When does City Wide recognize revenue from its services?
City_Wide Franchise · 2025 FDDAnswer from 2025 FDD Document
rred Revenue*
Deferred revenue, a contract liability, represents the Company's obligation to transfer services to a customer when consideration has already been received from the customer. Deferred revenue is primarily composed of contract consideration attributable to the franchise right, training and other technology services.
Revenue Recognition
Revenue is recognized when control of the promised services is transferred to the Company's customers, in an amount that reflects the consideration that it expects to be entitled to in exchange for those goods or services. The amount and timing of revenue recognition varies based on the nature of the services provided and the terms and conditions of the customer contract. See Note 2 for additional information about the Company's revenue.
Marketing Fund
The Company has the contractual right to charge a fixed percentage of franchisees gross sales amounts to be used for research and development, placement of media and creation of national and international marketing and advertising materials, promotion and marketing of the franchise system, and development of the National Business Development Program. All amounts collected are recorded as other services revenue to the extent that expenses have been incurred. Contributions collected but not yet expended are reflected as deferred income on the consolidated balance sheets. To the extent the marketing fund is overspent at year-end and the Company has not billed the maximum fixed percentage allowed for under the franchise agreements, a corresponding receivable is recorded at year-end. Amounts due from franchisees for marketing funds at December 31, 2024, 2023, and 2022 was approximately $0, $0, and $447,000, respectively.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 65)
What This Means (2025 FDD)
According to City Wide's 2025 Franchise Disclosure Document, the company recognizes revenue when control of the promised services is transferred to its customers. This recognition occurs in an amount that reflects the consideration City Wide expects to receive in exchange for those services. The timing and amount of revenue recognition can vary based on the specific services provided and the terms outlined in the customer contract.
For contracts where control is transferred over time, City Wide recognizes revenue as progress is made toward fulfilling the obligations of each contract. The method of measuring progress can vary. Fixed consideration from initial franchise and territory fees is recognized on a straight-line basis over the franchise period, reflecting continuous access to intellectual property. Variable consideration, such as royalties and marketing fund contributions, are measured using the sales-based royalty approach.
Consideration for other services is recognized as they are performed, proportional to the overall service period. Additionally, revenue from technology and hosting fees, training, and professional services like IT, call centers, and accounting is recognized as these services are delivered. Substantially all of City Wide's revenue is recognized over time. The company's revenue and cash flows are primarily affected by the enterprise size of the customer.