At what point does Crave Cookies generally recognize revenue from a new franchise?
Crave_Cookies Franchise · 2025 FDDAnswer from 2025 FDD Document
For the franchise fees, the Company has determined that the services they provide in exchange for upfront franchise fees, which primarily relate to pre-opening training and other services, are individually distinct from the ongoing services they provide to their franchisees. As a result, these pre-opening are recognized upon the franchise opening, and completion of the related training. The pre-opening fees that are recognized upon the franchise opening are generally 80% of the initial franchise fee. The remaining portion of the upfront franchise fees are recognized as revenue over the expected li
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 47)
What This Means (2025 FDD)
According to Crave Cookies's 2025 Franchise Disclosure Document, the company recognizes revenue from franchise fees at two different times. First, Crave Cookies recognizes a portion of the franchise fee as revenue when they have performed substantially all the services for the franchise, as outlined in the franchise agreement. This typically occurs upon completion of new franchise training and the commencement of business operations by the franchisee. The FDD states that generally 80% of the initial franchise fee is recognized at this point.
The remaining portion of the initial franchise fee is recognized as revenue over the expected life of the franchise agreement. This means that Crave Cookies spreads out the recognition of this remaining revenue over the duration of the agreement, rather than recognizing it all upfront.
Crave Cookies typically requires the entire franchise fee to be paid upon the execution of the franchise agreement. Consequently, the company initially records the franchise fee as deferred revenue until the specific revenue recognition criteria are met, as described above. This deferred revenue is then recognized as actual revenue as the services are provided and the franchise agreement progresses.