Are royalties included in the transaction price for Fast Fix Jewelry And Watch Repairs?
Fast_Fix_Jewelry_And_Watch_Repairs Franchise · 2025 FDDAnswer from 2025 FDD Document
Royalty fee revenue represents amounts paid by the franchisees for use of the name "Fast-Fix Jewelry and Watch Repairs" and for other services to be provided by the Company in accordance with the franchise agreement. Royalties are paid by the franchisee based upon a set percentage (as defined in the franchise agreement) of the franchisee's annual revenues that are related entirely to the Company's performance obligation under the franchise agreement. These royalties are considered variable consideration but, because they relate to a license of intellectual property, they are not included in the transaction price. Instead, royalty revenue is recognized as franchised sales occur. The royalty fees are recognized at a point in time, typically monthly, based on reported store sales. Advertising contributions received from franchisees are recorded as a component of rebate revenue and are offset by an equal corresponding expense in the accompanying consolidated statements of operations.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 37)
What This Means (2025 FDD)
According to Fast Fix Jewelry And Watch Repairs's 2025 Franchise Disclosure Document, royalty fees are not included in the transaction price. The document specifies that royalty fee revenue is generated from payments made by franchisees for the use of the "Fast-Fix Jewelry and Watch Repairs" name and other services detailed in the franchise agreement. These royalties are calculated as a percentage of the franchisee's annual revenues, as defined in the franchise agreement, and are directly tied to the company's performance obligations under the agreement.
Although these royalties are considered variable consideration, they are specifically excluded from the transaction price because they relate to a license of intellectual property. Instead, Fast Fix Jewelry And Watch Repairs recognizes royalty revenue as franchised sales occur. This means that the royalties are accounted for separately from the initial franchise fee or any other upfront payments.
The royalty fees are typically recognized monthly, based on the sales reported by each store. Additionally, the advertising contributions that Fast Fix Jewelry And Watch Repairs receives from its franchisees are recorded as a component of rebate revenue, which is then offset by a corresponding expense in the company's consolidated statements of operations. This accounting treatment ensures that royalty revenues are recognized when earned, based on actual sales performance, rather than being included in the initial transaction price.