What are the primary sources of revenue for Crown Gold Exchange?
Crown_Gold_Exchange Franchise · 2024 FDDAnswer from 2024 FDD Document
h maturities of three months or less when purchased.
Revenue Recognition
Revenues are primarily derived from franchise fees (one-time and recurring monthly fees). In accordance with Accounting Standards Codification (ASC) Topic 606, Revenue will be recognized when persuasive evidence of an arrangement exists, delivery has occurred, or services have been rendered, the seller's price to the buyer is fixed or determinable, and collectability is reasonable assured. The determination of whether fees and fixed or determinable and collection is reasonable assured involves the use of assumptions. Arrangement terms and customer information are evaluated to ensure that these criteria are met prior to recognition of revenue.
Specifically for franchisors, The Financial Accounting Standards Board (FASB) has issued an Accounting Standards Update (ASU) to ASC 606, Franchisors—'Revenue from Contracts with Customers (Subtopic 952-606): Practical Expedient' in 2022 which provides a new practical expedient that permits private company franchisors to account for preopening services provided to a franchisee as distinct from the franchise license if the services are consistent with those included in a predefined list within the guidance. The Company has elected to adopt this new standard.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 38)
What This Means (2024 FDD)
According to the 2024 Franchise Disclosure Document, Crown Gold Exchange's revenues are primarily derived from franchise fees. These fees include both one-time initial franchise fees and recurring monthly fees paid by franchisees.
The FDD specifies that Crown Gold Exchange will recognize revenue when there is persuasive evidence of an arrangement, delivery has occurred or services have been rendered, the price is fixed or determinable, and collectability is reasonably assured. This means Crown Gold Exchange recognizes revenue as it fulfills its obligations to franchisees.
Specifically, the initial franchise fees are allocated between pre-opening activities (like training) and the right to access Crown Gold Exchange's intellectual property. Revenue from pre-opening activities that are not brand specific is recognized as those services are rendered. The remaining portion of the franchisee fee is recorded as unearned revenue and is recognized over the term of the franchise agreement. This accounting method ensures that Crown Gold Exchange recognizes revenue in alignment with the services and rights it provides to its franchisees over time.