What components are included in the transaction price outlined in the Devon Creek franchise agreement?
Devon_Creek Franchise · 2024 FDDAnswer from 2024 FDD Document
ion price, allocate the transaction price, and recognize revenue.
For each franchised location, the Company enters into a formal franchise agreement that clearly outlines the transaction price, which includes an initial franchise fee, ongoing royalties, and the Company's performance obligations.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 45)
What This Means (2024 FDD)
According to Devon Creek's 2024 Franchise Disclosure Document, the transaction price for each franchised location is outlined in a formal franchise agreement. This price includes an initial franchise fee, ongoing royalties, and Devon Creek's performance obligations.
Devon Creek's primary revenues consist of initial franchise fees and royalty fees, the latter being a percentage of the franchisee's gross revenues. The company has adopted ASC 606, Revenue from Contracts with Customers, which dictates that revenues are recognized when control of promised goods or services is transferred to the customer, reflecting the expected consideration for those goods or services.
Under Devon Creek's revenue recognition policy, the initial franchise fee is allocated to initial training, operations manual, and marketing, and is recognized when the franchisee begins operations. The franchise agreements also stipulate that franchisees must pay continuing royalties, technology fees, and marketing fees to Devon Creek, based on a percentage of sales.