When does Cr3 American Exteriors recognize royalty revenue and other fees?
Cr3_American_Exteriors Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company's revenues consist of fees from franchises such as initial franchise fees, royalties, marketing fees, area representative fees, and other fees. The franchise fees are initially deferred revenue and recognized monthly. If the contract is signed before the fifteenth day of the month, half of the monthly accrual amount is recognized. If the contract is signed on or after the fifteenth day of the month, the entire month of the accrual is recognized. The royalty revenue and other fees are recognized when earned and are based on a percentage of gross sales of each individual franchise according to the franchise contract. The Company is obligated to provide the franchise with specific performances, including name and trademark use, as outlined in the franchise disclosure document.
Source: Item 23 — RECEIPTS (FDD pages 53–150)
What This Means (2025 FDD)
According to Cr3 American Exteriors' 2025 Franchise Disclosure Document, the company recognizes royalty revenue and other fees when they are earned. This recognition is based on a percentage of the gross sales of each individual franchise, as stipulated in the franchise contract.
In practical terms, this means that Cr3 American Exteriors accounts for royalty and other fees as revenue in the period they are earned by the franchisee, aligning with the accrual method of accounting. This is a standard practice in franchising, where revenue recognition is tied to the franchisee's sales performance.
For a prospective franchisee, this accounting practice means that Cr3 American Exteriors' financial statements will reflect revenue based on actual franchisee sales, providing a transparent view of the company's financial health. Additionally, the FDD states that the company is obligated to provide the franchise with specific performances, including name and trademark use, as outlined in the franchise disclosure document.