How does Corporate Cleaning Group measure revenue?
Corporate_Cleaning_Group Franchise · 2025 FDDAnswer from 2025 FDD Document
's specific markets are 1.5% of gross revenue. Upfront franchise fees are typically billed and paid when a new franchise agreement becomes effective.
Revenue is measured as the amount of consideration expected to be received in exchange for services performed. Because franchisees are invoiced at the time services are performed and the Company's right to consideration is unconditional at that time, the Company does not maintain contract asset balances. As of December 31, 2024, 2023, and 2022, the Company's contract liabilities primarily relate to cash received under initial franchise agreements from the sale of a franchise related to marketing and training that has not yet been delivered and for licensing for which revenue is recognized over time.
NOTES TO FINANCIAL STATEMENT December 31, 2024, 2023 and 2022
NOTE B - REVENUE RECOGNITION - continued.
Changes in the Company's contract liabilities, which are included in "deferred franchise fees" in the Company's balance sheet, are as follows:
| _ | ear Ended cember 31, 2024 | ear Ended cember 31, 2023 | ear Ended cember 31, 2022 | |
|---|---|---|---|---|
| Balance at beginning of period | $ | 767,432 | $ 427,660 | $ 109,644 |
| Increase due to cash received from franchisees | 254,000 | 396,500 | 339,500 | |
| Decreases due to recognition of revenue | (170,793) | (56,728) | (21,484) | |
| Contract liabilities at end of period |
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 51)
What This Means (2025 FDD)
According to Corporate Cleaning Group's 2025 Franchise Disclosure Document, revenue is measured by the amount of consideration expected to be received for services performed. Since Corporate Cleaning Group invoices franchisees when services are performed, and the right to consideration is unconditional at that time, the company does not maintain contract asset balances. As of December 31, 2024, 2023, and 2022, the company's contract liabilities primarily relate to cash received under initial franchise agreements from the sale of a franchise related to marketing and training that has not yet been delivered and for licensing for which revenue is recognized over time.
For Corporate Cleaning Group, the primary revenue sources are from contracts with franchisees, mainly through the sale of franchises and ongoing royalty fees. For the years ending December 31, 2024 and 2023, approximately 75% of the company's revenue came from royalties, while about 25% was from franchise sales. In 2022, royalties accounted for approximately 65% of revenue, and franchise sales made up about 35%.
Continuing royalty fees represent the majority of the consideration Corporate Cleaning Group receives under the franchise agreements. These fees are billed and paid monthly and are 6% of gross revenue from the franchised business. However, for franchises beginning after 2021, the royalty fee is 5.5% of gross revenue, along with a 1.5% local marketing fee. Upfront franchise fees are typically billed and paid when a new franchise agreement becomes effective. This means that a franchisee's revenue directly impacts the royalties paid to Corporate Cleaning Group, highlighting the importance of sales for both parties.