Under what conditions does Engineering For Kids recognize franchise fees as revenue?
Engineering_For_Kids Franchise · 2025 FDDAnswer from 2025 FDD Document
Revenue from contracts with customers is generated from royalties and brand fees paid by franchisees which are recognized at a point in time (monthly) based on a percentage of total sales as outlined in the franchise agreement. Website and technology fees are recognized at a point in time (monthly) based on a fixed rate defined by the Company. The Company also receives franchise fees which are recognized at a point in time upon completion of all significant initial services and signing of the franchise agreement.
Source: Item 22 — CONTRACTS (FDD page 53)
What This Means (2025 FDD)
According to Engineering For Kids' 2025 Franchise Disclosure Document, franchise fees are recognized as revenue at a specific point in time. This occurs when all significant initial services have been completed and the franchise agreement has been signed.
Engineering For Kids also generates revenue from royalties and brand fees, which are recognized monthly based on a percentage of total sales as outlined in the franchise agreement. Additionally, website and technology fees are recognized monthly at a fixed rate determined by the company.
For a prospective franchisee, this means that Engineering For Kids recognizes the initial franchise fee as revenue only after they have fulfilled their obligations in providing the initial services and the franchise agreement is signed. This accounting practice is important for franchisees to understand, as it clarifies when Engineering For Kids recognizes revenue and how it aligns with the services provided to franchisees.