When does Crave recognize initial franchise fees as revenue?
Crave Franchise · 2025 FDDAnswer from 2025 FDD Document
ng income consists of contractual franchise royalties based on a percentage of monthly sales which are recognized as revenue in the month earned as well as revenue from other contractual agreements.
Initial franchise fees are recognized as revenue once substantially all of the initial services of the Company required by franchise agreement have been performed and no other material conditions or obligations related to the determination of substantial performance exist. For the years ended December 31, 2024, 2023, and 2022, initial franchise fees billed were $485,000, $725,000, and $795,000, respectively.
Other revenue sources include initial fees for new franchisees which is mainly
Source: Item 23 — RECEIPTS (FDD pages 63–253)
What This Means (2025 FDD)
According to Crave's 2025 Franchise Disclosure Document, the company recognizes initial franchise fees as revenue once it has performed substantially all of the initial services required by the franchise agreement. This means Crave must have fulfilled its obligations to the new franchisee, and there should be no other significant conditions or obligations outstanding that would affect the determination of substantial performance. For the years ending December 31, 2024, 2023, and 2022, the initial franchise fees billed were $485,000, $725,000, and $795,000, respectively.
In addition to the initial franchise fee, Crave also generates revenue from other sources, including marketing and initial setup fees for new franchisees, royalties, technology fees, and other service fees. These additional fees are typically invoiced and earned either monthly or when a franchisee signs a franchise agreement. This diversified revenue stream indicates that Crave's financial model relies on both initial investments from franchisees and ongoing operational fees.
Crave adheres to Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 606, which provides a comprehensive model for accounting for revenue from contracts with customers. This standard requires Crave to identify performance obligations within the franchise agreement, allocate transaction prices to each obligation, and recognize revenue when it has satisfied each performance obligation by transferring control of the good or service to the franchisee. This approach ensures that revenue recognition is aligned with the delivery of services and transfer of control to the franchisee, providing a clear and consistent method for financial reporting.
Furthermore, the FDD states that unearned initial fee revenues from franchisee acquisition and acceptance will be recorded as deferred revenue and recognized as revenue over the term of the contract with each franchisee. This indicates that a portion of the initial fee may be recognized over the life of the franchise agreement, rather than entirely upfront, aligning revenue recognition with the ongoing support and services provided to the franchisee.