What conditions must be met for Crepe De Licious to account for its contracts?

According to the 2025 Crepe De Licious Franchise Disclosure Document, the company recognizes revenue from franchise fees, royalties, and sales of creperie products. Crepe De Licious accounts for its contracts when specific criteria are met to ensure proper revenue recognition. These conditions apply both to contracts related to franchised creperies and to the company-owned restaurant.

Specifically, Crepe De Licious must have obtained approval and commitment from both parties involved in the contract. The rights of each party must be clearly identified within the contract. The payment terms associated with the contract must be clearly defined and understood by both parties. The contract must possess commercial substance, indicating that it has the potential to affect the company's future cash flows. Finally, the collectability of consideration, meaning the payment for the goods or services provided, must be probable.

For the Crepe De Licious restaurant, revenue is primarily earned through the sale of crepes and beverages to consumers. The contracts with these customers are typically short-term, ending upon the delivery of the ordered food. The customer base for the restaurant is primarily residents of the Miami, Florida area, where the restaurant is located.