When are initial franchise fees payable by a Closet Storage Concepts franchisee?
Closet_Storage_Concepts Franchise · 2025 FDDAnswer from 2025 FDD Document
Initial franchise fees are payable by the franchisee upon signing a new franchise agreement or successor franchise agreement. Revenue from initial fees is recognized when the performance obligation is satisfied. Performance obligations that are normally satisfied by the opening of the franchised business to the public are determined to be earned during the period from the execution of the contract to the opening of the franchised business which is generally less than one year. Unearned initial fee revenues from franchisee acquisition and acceptance will be as deferred non‐refundable revenue and recognized as revenue over the term of the contract which is currently 10 years. There are currently no unearned initial fee revenues as management has determined that all performance obligations have been satisfied.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 59)
What This Means (2025 FDD)
According to Closet Storage Concepts's 2025 Franchise Disclosure Document, the initial franchise fees are due upon signing a new franchise agreement or a successor franchise agreement. Closet Storage Concepts recognizes the revenue from these initial fees when the performance obligation is satisfied.
Closet Storage Concepts considers the performance obligations to be satisfied typically when the franchised business opens to the public, which generally occurs within one year from the contract's execution. If there are any unearned initial fee revenues from franchisee acquisition and acceptance, Closet Storage Concepts will defer these as non-refundable revenue and recognize them over the contract term, which is currently 10 years.
As of the date of the financial statements, Closet Storage Concepts reports that there are no unearned initial fee revenues, indicating that all performance obligations related to initial fees have been satisfied. This means that Closet Storage Concepts has fulfilled its obligations related to the initial fees it has collected.