How does the timing of revenue recognition vary for Crave Cookies?
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 timing of revenue recognition depends on the nature of the goods or services provided and the specific terms of the customer contract. For franchise sales, Crave Cookies recognizes a portion of the proceeds as revenue when they have substantially performed the services outlined in the franchise agreement. This typically occurs upon completion of new franchisee training and the commencement of the franchise's business operations.
The remaining portion of the franchise fee is recognized as revenue over the expected life of the franchise agreement. Crave Cookies generally requires the entire franchise fee to be paid when the franchise agreement is executed. Consequently, the company recognizes deferred revenue until the specific revenue recognition criteria are met.
For a prospective franchisee, this means that while they pay the full franchise fee upfront, Crave Cookies does not immediately recognize all of it as revenue. Instead, a portion is recognized initially after training and store opening, with the remainder recognized gradually over the term of the franchise agreement. This approach aligns revenue recognition with the delivery of services and the ongoing support provided to the franchisee, which is a common practice in franchising.