How does Crave Cookies recognize revenue for sales-based royalty and marketing revenue?
Crave_Cookies Franchise · 2025 FDDAnswer from 2025 FDD Document
Revenues from continuing fees, including royalties, marketing fees and upfront franchise fees. The Company receives a monthly royalty fee equal to 6% and monthly marketing fee equal to 2% of the franchisees weekly gross sales due the following Tuesday. These royalty payments are considered to be variable consideration; however, the Company relies on a narrow exception to the variable consideration criteria where there is a sales-based or usage-based royalty and marketing. Under this exception, the Company recognizes revenue for sales-based royalty and marketing revenue on a monthly basis based on sales reports by their franchisees.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 47)
What This Means (2025 FDD)
According to Crave Cookies' 2025 Franchise Disclosure Document, the company recognizes revenue for sales-based royalty and marketing revenue on a monthly basis. This recognition is based on the sales reports submitted by their franchisees.
Crave Cookies receives a monthly royalty fee equal to 6% and a monthly marketing fee equal to 2% of the franchisees' weekly gross sales, which are due the following Tuesday. These payments are considered variable consideration. However, Crave Cookies relies on a narrow exception to the variable consideration criteria where there is a sales-based or usage-based royalty and marketing.
For a prospective Crave Cookies franchisee, this means that the royalty and marketing fees they pay are directly tied to their sales performance each month. The franchisor recognizes this revenue in the same period, aligning the franchisee's sales with the franchisor's revenue recognition. This arrangement is typical in franchising, where royalty and marketing fees are calculated as a percentage of gross sales.