How does Crepe De Licious recognize revenue from franchise fees?
Crepe_De_Licious Franchise · 2025 FDDAnswer from 2025 FDD Document
The following performance obligations have been identified for which revenue is recognized at the point services or products are provided to satisfy the respective performance obligations:
- Franchise Fees For performance obligations related to franchise fees from franchisees, the Company has elected to adopt Financial Accounting Standards Board Accounting Standards Update 2021-02 which allows them to recognize the initial franchise fees in the year the store opens. The sales are made to franchisees. The Company 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.
Source: Item 23 — RECEIPTS (FDD pages 57–233)
What This Means (2025 FDD)
According to Crepe De Licious's 2025 Franchise Disclosure Document, the company recognizes revenue from franchise fees when the store opens. Crepe De Licious has elected to adopt Financial Accounting Standards Board Accounting Standards Update 2021-02, which allows them to recognize the initial franchise fees in the year the store opens.
Crepe De Licious makes sales to franchisees and receives a contractually obligated fee from the franchisee based on the restaurant. Payment for the initial franchise fees are due when the agreement is signed. The revenue from these franchise fees is recognized at a specific point in time, which is when the store opens.
This accounting practice means that Crepe De Licious does not recognize the franchise fee as revenue until the franchisee's store is operational. This approach aligns the revenue recognition with the point at which the franchisee can begin generating income, which is a common practice in the franchise industry.