When does Cool Binz recognize deferred revenue contract liabilities related to franchise fees?
Cool_Binz Franchise · 2025 FDDAnswer from 2025 FDD Document
Upon signing of the Franchise Agreement, you must pay an initial franchise fee of $59,900 (the "Initial Franchise Fee"). The Initial Franchise Fee is deemed fully earned upon payment and non-refundable under any circumstances.
Based upon the franchisor's financial condition, the Maryland Securities Commissioner has required a financial assurance. Therefore, all initial fees and payments owed by franchisees shall be deferred until the franchisor completes its pre-opening obligations under the franchise agreement.
The Virginia State Corporation Commission's Division of Securities and Retail Franchising requires us to defer payment of the initial franchise fee and other initial payments owed by franchisees to the franchisor until the franchisor has completed its pre-opening obligations under the franchise agreement.
Source: Item 23 — RECEIPTS (FDD pages 63–238)
What This Means (2025 FDD)
According to Cool Binz's 2025 Franchise Disclosure Document, the initial franchise fee is deemed fully earned upon payment. This means that Cool Binz recognizes the initial franchise fee as revenue immediately when it is paid, and it is non-refundable under any circumstances.
This policy has significant implications for prospective franchisees. Because the fee is recognized as earned by Cool Binz upon payment, franchisees should understand that this money is non-refundable, even if the franchise does not open or is terminated early. This is a common practice in franchising, as the initial fee is intended to compensate the franchisor for the costs associated with granting the franchise, including marketing, training, and other support.
However, there are addenda for franchisees in Maryland and Virginia that affect when Cool Binz can collect the initial franchise fee. For franchisees in Maryland, all initial fees and payments owed are deferred until Cool Binz completes its pre-opening obligations under the franchise agreement. The Virginia State Corporation Commission also requires Cool Binz to defer payment of the initial franchise fee and other initial payments until Cool Binz has completed its pre-opening obligations. Therefore, prospective franchisees in these states will not be required to pay the initial franchise fee until Cool Binz has fulfilled its pre-opening obligations.