How does Eos Worldwide recognize revenue from contracts with customers?
Eos_Worldwide Franchise · 2025 FDDAnswer from 2025 FDD Document
Revenue recognition: The Company recognizes revenue in accordance with Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers, which provides a five-step model for recognizing revenue from contracts with customers as follows:
- Identify the contract with a customer
- Identify the performance obligations in the contract
- Determine the transaction price
- Allocate the transaction price to the performance obligations in the contract
- Recognize revenue when or as the performance obligations are satisfied
Under ASC 606, revenue is recognized when control of the promised goods or service is transferred to the Company's customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or service.
Note 1. Nature of Operations and Summary of Significant Accounting Policies (Continued)
Revenue is primarily derived of the following:
Membership/subscriptions: The Company generates revenues by billing its franchisees for subscribed monthly membership fees. The franchisees are billed monthly upfront at their respective subscription renewal date and revenue is recognized at the renewal date. Any membership periods that overlap year-end are reclassified to deferred revenue.
Boot Camp: Boot Camp event revenue is billed and received as part of the initial franchise agreement with new franchisees. These fees received are carried as deferred revenue until it is recognized when the respective franchisee attends the Boot Camp training.
Store income: The Company generates revenues by selling training materials, educational literature and other various products through their website. Revenue is recognized upon shipment, as that is when the customer obtains control of the promised good. The Company has elected to treat shipping and handling activities related to contracts with customers as costs to fulfill the promise to transfer the associated product and not as a separate performance obligation.
Warm lead referral: The Company generates revenues by referring general inquiries for coaching services to its franchisees. Once the member holds an initial meeting with the prospect and the relationship is deemed to have substance, the Company records revenue for the referral fee, which varies based on the go forward level of service.
Franchise fee: The Company bills and receives revenue associated with new franchisee agreements. This revenue is deferred and is recognized monthly pro rata over the life of the agreement, typically 45 months.
Source: Item 22 — CONTRACTS (FDD page 74)
What This Means (2025 FDD)
According to Eos Worldwide's 2025 Franchise Disclosure Document, the company adheres to Accounting Standards Codification (ASC) Topic 606, which outlines a five-step model for recognizing revenue from contracts. This model includes identifying the contract, identifying performance obligations, determining the transaction price, allocating the price to the obligations, and recognizing revenue as these obligations are met. Generally, Eos Worldwide recognizes revenue when control of goods or services transfers to the customer, reflecting the consideration they expect to receive.
Eos Worldwide derives revenue from several sources, each with its own recognition method. Membership or subscription fees are billed monthly to franchisees, with revenue recognized at the renewal date. Boot Camp event revenue, collected as part of the initial franchise agreement, is deferred until the franchisee attends the training. Revenue from store income, generated through the sale of training materials and products, is recognized upon shipment. Warm lead referral fees are recorded once a franchisee holds an initial meeting with a prospect and the relationship is deemed substantive. Finally, franchise fees are deferred and recognized pro rata over the typical 45-month term of the agreement.
For a prospective Eos Worldwide franchisee, understanding these revenue recognition policies is crucial. For instance, the initial franchise fee is not immediately recognized as revenue by Eos Worldwide but is instead spread out over 45 months. Similarly, fees paid for the Boot Camp are held as deferred revenue until the training occurs. This accounting practice impacts Eos Worldwide's financial statements and could affect how a franchisee assesses the company's financial health and stability.
Furthermore, Eos Worldwide's policy of recognizing revenue upon shipment for store income means that any returns or allowances could impact the revenue recognized. The handling of shipping and handling costs as fulfillment costs rather than separate performance obligations also simplifies the accounting process for these transactions. Franchisees should be aware of these nuances as they evaluate the overall financial picture presented by Eos Worldwide.