When does Crave Cookies recognize a portion of the proceeds from the sale of franchises as revenue?
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's 2025 Franchise Disclosure Document, the company recognizes a portion of franchise sale proceeds as revenue when it has substantially performed all services stipulated in the franchise agreement. This typically occurs upon completion of new franchise training and the commencement of the franchise's business operations.
Crave Cookies collects the entire franchise fee upon the execution of the franchise agreement. However, because the company has not yet provided all of the services associated with the franchise fee at that point, the revenue is initially deferred. This deferred revenue is recognized as the services are rendered over time.
The remaining portion of the franchise fee is recognized as revenue over the expected life of the franchise agreement. This aligns with the principle of recognizing revenue as services are delivered throughout the duration of the agreement. This accounting practice ensures that Crave Cookies's revenue recognition accurately reflects the delivery of its franchise services over the entire term of the agreement.