When are Expense Reduction Analysts royalty fees recognized as revenue?

According to Expense Reduction Analysts' 2025 Franchise Disclosure Document, royalty fees, which are 15% of gross billings, are recognized as revenue when receipts from client billings are received. These fees compensate Expense Reduction Analysts for the ongoing support services provided to the franchisee and are subject to a variable minimum fee.

This means that Expense Reduction Analysts recognizes royalty revenue only when the franchisee's clients actually pay their bills. This policy aligns the franchisor's revenue recognition with the actual cash flow generated by the franchise, which is a common practice in franchising. The 15% royalty is based on gross billings, meaning the total amount billed to clients before any deductions.

For a prospective Expense Reduction Analysts franchisee, this revenue recognition policy has a direct impact on their financial relationship with the franchisor. The franchisee will owe 15% of whatever they bill to clients, but Expense Reduction Analysts only recognizes that amount as revenue once the client pays. This could affect the timing of revenue recognition for Expense Reduction Analysts, especially if there are delays in client payments. The franchisee should be aware of this policy and factor it into their financial projections and cash flow management.

Additionally, the royalty fee is subject to a variable minimum fee, which means that the franchisee may have to pay a minimum royalty amount regardless of actual client payments. The FDD does not specify how the minimum royalty fee is calculated or when it is assessed, so prospective franchisees should seek clarification on this point from Expense Reduction Analysts.