How does the amount and timing of revenue recognition vary for Crave Cookies?
Crave_Cookies Franchise · 2025 FDDAnswer from 2025 FDD Document
Revenue is recognized when control of the promised goods or services is transferred to the Company's customers, in an amount that reflects the consideration that it expects to be entitled to in exchange for those goods or services. The amount and timing of revenue recognition varies based on the nature of the goods or services provided and the terms and conditions of the customer contract. A portion of the proceeds from the sale of franchises is recognized as revenue when the Company has performed substantially all services for the franchise as stipulated in the franchise agreement, generally at completion of new franchise training and the start of business by the franchise. The remaining portion is recognized as revenue over the expected life of the franchise agreement. The Company generally requires that the entire franchise fee be paid upon execution of the franchise agreement and consequently recognizes deferred revenue until certain revenue recognition criteria have been met.
See Note 2 for additional information about the Company's revenue.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 47)
What This Means (2025 FDD)
According to Crave Cookies' 2025 Franchise Disclosure Document, revenue recognition depends on the nature of the goods or services provided and the specific terms of the customer contract. Crave Cookies recognizes revenue when control of the promised goods or services is transferred to the customer, reflecting the consideration they expect to receive. This means that the timing and amount of revenue recognized can vary.
Specifically, when Crave Cookies sells a franchise, a portion of the franchise fee is recognized as revenue once they have substantially performed all the services outlined in the franchise agreement. This typically occurs upon completion of the new franchisee training and the commencement of the franchise's business operations. The remaining portion of the franchise fee is recognized over the expected life of the franchise agreement.
Crave Cookies generally requires the entire franchise fee to be paid upfront when the franchise agreement is executed. Consequently, the company initially records this as deferred revenue until the criteria for revenue recognition are met. This deferred revenue is then recognized as actual revenue over time, as Crave Cookies fulfills its obligations to the franchisee. Prospective franchisees should refer to Note 2 in Crave Cookies' financial statements for more detailed information about the company's revenue recognition policies.