In the context of Crave Cookies' revenue recognition, what must be identified within a contract with a customer?

According to Crave Cookies' 2025 Franchise Disclosure Document, the company uses a five-step model to determine the amount of revenue recognized. The first two steps of this model involve identifying the contract with the customer and identifying the performance obligations within that contract. This means that Crave Cookies must clearly define the agreement with the franchisee and outline all the specific duties and responsibilities Crave Cookies is obligated to fulfill as part of the franchise agreement.

For a prospective Crave Cookies franchisee, this is important because it clarifies what the franchisee is entitled to receive from Crave Cookies in exchange for their franchise fee and ongoing royalties. The identified performance obligations dictate what services, support, and resources Crave Cookies is contractually bound to provide. This could include pre-opening assistance, training, marketing support, and ongoing operational guidance.

Understanding these obligations is crucial for a franchisee to assess the value of the franchise opportunity and hold Crave Cookies accountable for delivering on its promises. Any ambiguity or lack of clarity in the identified performance obligations could create potential disputes or unmet expectations. Therefore, a prospective franchisee should carefully review the franchise agreement and ensure that all the services and support they expect to receive are explicitly stated as performance obligations of Crave Cookies.