What portion of Crave Cookies' 2024 revenues are considered deferred?

According to Crave Cookies' 2025 Franchise Disclosure Document, the company's total revenues during 2024 were $2,413,050, and $1,277,704 of that amount is considered deferred until Crave Cookies fulfills its obligations. This deferred revenue represents money that Crave Cookies has received but has not yet earned under accounting principles.

For a prospective franchisee, understanding deferred revenue is crucial because it reflects the company's financial stability and how it recognizes income. In Crave Cookies' case, the deferred revenue likely relates to franchise fees received for which the company still needs to provide services, such as pre-opening training and support. The FDD further clarifies that franchisee deposits in the amount of $1,277,049 have been deferred until the revenue recognition requirements of generally accepted accounting principles have been met.

The way Crave Cookies recognizes revenue from franchise fees is that approximately 80% of the initial franchise fee is recognized upon the franchise opening and completion of related training. The remaining portion is recognized over the expected life of the franchise agreement, typically 10 years. This approach is common in franchising, as it aligns revenue recognition with the delivery of services and the franchisee's use of the franchisor's intellectual property. If a Crave Cookies franchise closes before the 10-year term, the company recognizes any remaining unearned revenue at that time.

It is also important to note that Crave Cookies receives ongoing revenue through royalties (6%) and marketing fees (2%) based on a percentage of franchisees' weekly gross sales. These payments are considered variable consideration and are recognized monthly based on sales reports from franchisees. This revenue model is typical in franchise systems, where franchisors derive income from both initial fees and ongoing royalties tied to franchisee performance.