Under what condition does Dog Haus recognize franchise fee revenue?
Dog_Haus Franchise · 2025 FDDAnswer from 2025 FDD Document
is not a Dog Haus Franchise Agreement, and does not grant Area Developer any right to use the Dog Haus Marks or the Dog Haus System or to sell or distribute any Dog Haus Authorized Products. To protect the Dog Haus System, the Dog Haus Marks, the Dog Haus Trade Secrets and the goodwill associated with the same, Area Developer's rights to use the Dog Haus Marks and the Dog Haus System will be granted to Area Developer solely under the terms of a Dog Haus Franchise Agreement.
3. TERM.
The Initial Term shall commence on the Effective Date and shall expire on the Expiration Date. Except as provided in Section 2.6, this Agreement is not renewable.
4 PAYMENTS BY AREA DEVELOPER
- 4.1 Development Fee. On the Effective Date, Area Developer shall pay Franchisor a Development Fee to for the rights granted to Area Developer under this Agreement by a wire transfer of immediately available funds to a bank account designated by Franchisor. The Development Fee is fully earned by Franchisor when paid and is nonrefundable, in whole or in part, under any circumstances.
- 4.2 Initial Franchise Fees. Area Developer shall pay Franchisor an Initial Franchise Fee for each Dog Haus Restaurant to be operated under this Agreement. Area Developer shall then sign the Franchise Agreement for the first Dog Haus Restaurant and pay Franchisor an Initial Franchise Fee, when Area Developer signs this Agreement, in full on the Effective Date by a wire transfer of immediately available funds to a bank account designated by Franchisor.
Source: Item 23 — RECEIPTS (FDD pages 87–328)
What This Means (2025 FDD)
According to Dog Haus's 2025 Franchise Disclosure Document, the franchisor fully earns the initial franchise fee when paid, and it is non-refundable under any circumstances. Specifically, for each Dog Haus Restaurant to be operated under an Area Development Agreement, the Area Developer must pay Dog Haus an Initial Franchise Fee. The Area Developer must then sign the Franchise Agreement for the first Dog Haus Restaurant and pay the Initial Franchise Fee in full on the Effective Date. For each additional Dog Haus Restaurant, the Initial Franchise Fee is payable upon execution of each Franchise Agreement.
This means that Dog Haus recognizes the franchise fee as revenue immediately upon receipt of payment and signing of the franchise agreement. This is a common practice in franchising, as the fee is intended to compensate the franchisor for granting the franchise rights and providing initial services. However, the non-refundable nature of the fee means that franchisees bear the risk if they are unable to open their Dog Haus restaurant for any reason.
However, there is an exception for Hawaii franchisees. According to the Hawaii Addendum to the Franchise Agreement, all initial fees and payments due to Dog Haus will be deferred until the first business day following the date that Dog Haus has completed all of its material initial obligations to the franchisee under the Franchise Agreement or Area Development Agreement and the franchisee begins to conduct business at the first Dog Haus Restaurant. At that time, all initial fees and payments will become immediately due and payable. This deferral is imposed by the Hawaii Department of Commerce and Consumer Affairs due to Dog Haus's financial condition.