What is the fifth and final step Crave Cookies takes to recognize revenue?
Crave_Cookies Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company determines the amount of revenue to be recognized in the revenue stream through the application of the following five-step model:
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- Identification of the contract, or contracts with the customer;
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- Identification of the performance obligations in the contract;
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- Determination of the transaction price:
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- Allocation of the transaction price to the performance obligations in the contract; and
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- Recognition of revenue when or as the Company satisfies the performance obligations
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 47)
What This Means (2025 FDD)
According to Crave Cookies' 2025 Franchise Disclosure Document, the company uses a five-step model to determine the amount of revenue recognized. The fifth and final step in this model is the "Recognition of revenue when or as the Company satisfies the performance obligations".
In simpler terms, Crave Cookies recognizes revenue when they have fulfilled their promises or duties to the customer, whether it's providing pre-opening services to enable the franchisee to operate the franchise or delivering products/equipment. This means that the company doesn't count the money as earned until they've actually delivered the goods or services that the customer paid for.
For a prospective Crave Cookies franchisee, this revenue recognition policy is important because it dictates when Crave Cookies recognizes revenue from franchise fees, royalties, and other sales. Understanding this policy can provide insight into how Crave Cookies manages its finances and reports its earnings.