What five-step model does Crave Cookies use to determine the amount of revenue to be recognized?
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:
- · Identification of the contract, or contracts with the customer;
- · Identification of the performance obligations in the contract;
- · Determination of the transaction price;
- · Allocation of the transaction price to the performance obligations in the contract; and
- 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 to be recognized in its revenue stream. This model is crucial for financial reporting and ensuring accurate representation of the company's financial performance. The five steps are:
- Identification of the contract, or contracts with the customer:
- Identification of the performance obligations in the contract:
- Determination of the transaction price:
- Allocation of the transaction price to the performance obligations in the contract:
- Recognition of revenue when or as the Company satisfies the performance obligations
This model is based on accounting standards that require companies to recognize revenue when they have transferred goods or services to customers and have a right to receive payment. For Crave Cookies, this applies to revenue from franchise fees, royalties, service sales, and product sales. Understanding this model is important for franchisees as it dictates how Crave Cookies recognizes revenue, which can impact financial reporting and the overall financial health of the company.