How did Craters & Freighters' franchise support costs change between the two years presented?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
Recognition (Continued)
Franchise revenues relating to technology and insurance programs are recognized over time on a monthly basis as the franchisee utilizes the program features. These revenues are presented within "franchise revenues" and expenses incurred to provide these services are included within "technology support" and "insurance program."
Costs to obtain or fulfill a contract that are incremental and recoverable are capitalized and amortized ratably over the term of the franchise agreement. The Company classifies these contract assets as "deferred franchising costs." The Company did not have any notable deferred costs related to obtaining or fulfilling contracts as of December 31, 2024 and 2023.
Franchisees are eligible to participate in various royalty rebate programs. The rebate programs operate on an annual basis and each rebate is distributed to franchisee within 45 days following the year-end if the franchisee has met all eligibility requirements, as defined.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 49)
What This Means (2025 FDD)
Based on the 2025 Franchise Disclosure Document, Craters & Freighters includes expenses for technology support and insurance programs within "franchise revenues." These expenses are directly related to providing these services to franchisees.
For the years ending December 31, 2024 and December 31, 2023, Craters & Freighters estimates royalty rebates payable to franchisees totaled approximately $1,072,297 and $981,420, respectively. These rebates are contingent upon franchisees meeting eligibility requirements such as timely royalty payments and submission of required reports.
These royalty rebates are classified as "accounts payable" in Craters & Freighters' financial statements. The change in these figures from year to year can give a franchisee insight into the financial relationship between Craters & Freighters and its franchisees.