How does Engel & Volkers recognize consideration allocated to training and fit-out services that are not brand specific?

According to Engel & Volkers' 2025 Franchise Disclosure Document, the company uses a specific accounting method for training and fit-out services provided to franchisees that are not specific to the Engel & Volkers brand. These services, such as architectural shop-fitting, are considered distinct from the core franchise offering because they provide a benefit to the franchisee that is not highly related to accessing Engel & Volkers' intellectual property. This means the franchisee could use the fit-out for another real estate brokerage, making it separate from the Engel & Volkers franchise operation. Engel & Volkers recognizes revenue for these services separately from the franchise fees.

To determine the revenue recognition for these non-brand-specific services, Engel & Volkers estimates the stand-alone selling price of the training and fit-out services using a cost-plus mark-up approach. The company allocates the initial franchise fees and any fixed consideration under the franchise agreement to the stand-alone selling price of these services. Any remaining amount after this allocation is then assigned to the right to access Engel & Volkers' intellectual property.

Once the allocation is complete, the consideration assigned to the training and fit-out services that are not brand specific is recognized ratably as the services are rendered. This means that Engel & Volkers recognizes the revenue over the period in which the services are provided to the franchisee, rather than recognizing it all upfront. This approach ensures that revenue recognition aligns with the delivery of these specific services.