What are Engel & Volkers' primary performance obligations under the franchise agreement?
Engel_Volkers Franchise · 2025 FDDAnswer from 2025 FDD Document
e grant of a master franchise. Both the initial admission fee and an up-front franchise fee from a master franchisee are nonrefundable and payable when the underlying agreement is signed by the franchisee or master franchisee. Sales-based royalties and marketing fees are payable monthly for master franchisees. For all other franchisees, sales-based royalties and marketing fees are generally payable weekly.
The Company's primary performance obligations under the franchise agreement include granting certain rights to access the Company's intellectual property and a variety of activities relating to opening a franchise unit, including site selection, training and other such activities commonly referred to collectively as "pre-opening activities." The Company has determined that certain of the training provided to the franchisee is not brand specific and provides the franchisee with relevant general business information that is separate from the operation of a Company-branded franchise unit. The portion of training services provided that is not brand specific is deemed to be distinct as it provides a benefit to the franchisee and is not highly interrelated or interdependent to the access of the Company's intellectual property and, therefore, is accounted for as a separate distinct performance obligation.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition (Continued)
Franchise revenues (continued)
The Company has also determined that certain architectural shop-fitting services for the franchisees are not brand specific and include design-related work to "fit-out" the shop. This fit-out allows the space to be converted to any other real estate brokerage and is separate from the operation of a Company-branded franchise unit. The portion of shop fit-out provided that is not brand specific is deemed to be distinct as it provides a benefit to the franchisee and is not highly interrelated or interdependent to the access of the Company's intellectual property and, therefore, is accounted for as a separate distinct performance obligation.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 88)
What This Means (2025 FDD)
According to Engel & Volkers' 2025 Franchise Disclosure Document, the company's primary performance obligations under the franchise agreement include granting franchisees certain rights to access Engel & Volkers' intellectual property. Additionally, Engel & Volkers is obligated to perform a variety of activities related to opening a franchise unit. These activities include site selection, training, and other pre-opening tasks.
Engel & Volkers distinguishes between brand-specific and non-brand-specific training provided to franchisees. The portion of training that is not brand-specific, offering relevant general business information separate from the operation of an Engel & Volkers-branded franchise unit, is considered a distinct performance obligation. This is because it provides a benefit to the franchisee and is not highly interrelated or interdependent with access to Engel & Volkers' intellectual property.
Similarly, Engel & Volkers has determined that certain architectural shop-fitting services for franchisees are not brand specific. These services include design-related work to "fit-out" the shop, allowing the space to be converted to any other real estate brokerage. This is also considered a separate distinct performance obligation because it provides a benefit to the franchisee and is not highly interrelated or interdependent with access to Engel & Volkers' intellectual property. All other pre-opening activities are considered highly interrelated and interdependent with access to the company's intellectual property and are therefore accounted for as a single performance obligation.