What is the Crave Cookies franchisee's obligation regarding continuing/royalty fees?
Crave_Cookies Franchise · 2025 FDDAnswer from 2025 FDD Document
As a franchisor, the Company's principal business is to sell franchises and continuing fees to provide managed assistance of those franchises. Franchise rights may be granted through a franchise agreement that sets out the terms of the arrangement with the franchisee. The franchise agreements require that the franchisee remit continuing/royalty fees to the Company based on the monthly revenues of the franchisees. The franchise agreements also require certain, upfront franchise fees such as initial fees paid upon opening of a franchise. The Company recognizes revenue when performance obligations under the terms of contracts with its customers are satisfied, which occurs when pre-opening services are provided to a customer to enable them to direct the use and obtain the benefit of the franchise, with the remaining portion being recognized over the life of the contract.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 47)
What This Means (2025 FDD)
According to Crave Cookies' 2025 Franchise Disclosure Document, franchisees are required to pay continuing/royalty fees to Crave Cookies. These fees are based on the monthly revenues of the franchise location.
Crave Cookies, as a franchisor, generates revenue from three primary sources: franchise fees and royalties, service sales, and product sales. The company recognizes revenue based on a five-step model that includes identifying the contract, performance obligations, transaction price, allocation of the transaction price, and recognition of revenue when performance obligations are met.
For franchisees, the franchise agreement outlines the terms, including the obligation to remit continuing/royalty fees. In addition to these ongoing fees, franchisees also pay upfront franchise fees, such as initial fees upon opening their location. Crave Cookies recognizes revenue from these fees when pre-opening services are provided, enabling the franchisee to operate and benefit from the franchise. The remaining portion of the revenue is recognized over the life of the contract.
This means that a portion of the initial franchise fee covers the services Crave Cookies provides to get the franchisee's location up and running. The rest of the initial fee, along with the continuing royalty fees, are recognized as revenue by Crave Cookies over the duration of the franchise agreement, reflecting the ongoing support and brand usage provided to the franchisee.