How does Crepe De Licious recognize initial franchise fee revenue from franchisees?

According to Crepe De Licious's 2025 Franchise Disclosure Document, the company recognizes initial franchise fees in the year the store opens. This is based on the Financial Accounting Standards Board Accounting Standards Update 2021-02, which Crepe De Licious has elected to adopt. The sales are made to franchisees, and Crepe De Licious receives a contractually obligated fee from the franchisee based on the restaurant. Payment for the initial franchise fees are due at the time the agreement is signed. Revenue from franchise fees are recognized at a point in time.

For a prospective franchisee, this means that Crepe De Licious does not recognize the initial franchise fee as revenue until the franchisee's store actually opens. Although the franchisee pays the fee upon signing the agreement, Crepe De Licious defers recognizing that payment as revenue on its financial statements until the store's opening. This accounting practice can provide a clearer picture of when Crepe De Licious actually earns the revenue associated with granting a new franchise.

This approach is generally favorable for franchisees because it aligns revenue recognition with the commencement of operations. It also reflects that the value of the franchise is realized when the franchisee begins operating the business. Franchisees should confirm with Crepe De Licious that this policy is consistently applied and understand any conditions that might affect the timing of revenue recognition.