At what point does Crave Cookies generally recognize revenue from a new Crave Cookies franchise?
Crave_Cookies Franchise · 2025 FDDAnswer from 2025 FDD Document
revenue is recognized when control of the promised goods or services is transferred to the Company's customers, in an amount that reflects the consideration that it expects to be entitled to in exchange for those goods or services. The amount and timing of revenue recognition varies based on the nature of the goods or services provided and the terms and conditions of the customer contract. A portion of the proceeds from the sale of franchises is recognized as revenue when the Company has performed substantially all services for the franchise as stipulated in the franchise agreement, generally at completion of new franchise training and the start of business by the franchise. The remaining portion is recognized as revenue over the expected life of the franchise agreement. The Company generally requires that the entire franchise fee be paid upon execution of the franchise agreement and consequently recognizes deferred revenue until certain revenue recognition criteria have been met
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 47)
What This Means (2025 FDD)
According to Crave Cookies' 2025 Franchise Disclosure Document, the company recognizes a portion of the franchise fee as revenue when it has substantially performed the services required under the franchise agreement. This typically occurs upon completion of the new franchisee's training and the commencement of their Crave Cookies business operations. The remaining portion of the franchise fee is recognized over the expected life of the franchise agreement.
Crave Cookies typically requires the entire franchise fee to be paid when the franchise agreement is executed. Consequently, the company initially records this payment as deferred revenue. This deferred revenue is then recognized as actual revenue once the specific revenue recognition criteria are met, aligning with the performance of services and the passage of time over the franchise agreement's duration.
For a prospective Crave Cookies franchisee, this means that while the full franchise fee is due upfront, Crave Cookies does not immediately recognize all of it as revenue. Instead, a portion is recognized after training and store opening, with the remainder recognized gradually over the term of the agreement. This accounting practice reflects the ongoing support and brand usage provided by Crave Cookies to its franchisees.