Where are Crave Cookies' deferred franchise fee revenues located on the balance sheet?

According to Crave Cookies' 2025 Franchise Disclosure Document, deferred franchise fee revenues are classified as contract liabilities on the balance sheet. These liabilities represent Crave Cookies' obligation to provide goods or services to a customer (the franchisee) for which they have already received payment. This accounting treatment is standard practice in franchising, where initial franchise fees often cover services and rights extending over the term of the franchise agreement.

Specifically, Crave Cookies collects the entire franchise fee upon the execution of the franchise agreement. However, a portion of this fee is recognized as revenue only after Crave Cookies has performed substantially all the initial services for the franchisee, such as completing new franchise training and helping the franchisee start their business. The remaining portion of the fee is then recognized as revenue gradually over the expected life of the franchise agreement, which is typically 10 years.

This deferred revenue recognition ensures that Crave Cookies does not prematurely recognize income before fulfilling its obligations to the franchisee. For a prospective franchisee, this means that the initial franchise fee you pay covers not only the immediate services but also the ongoing support and rights you receive throughout the franchise term. It also aligns Crave Cookies' financial interests with the long-term success of its franchisees, as the company continues to recognize revenue as long as the franchise remains in operation.