How does Floors To Go recognize revenue from the sale of franchisee licenses?
Floors_To_Go Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company also recognizes a portion of revenue from the sale of franchisee licenses at the time a contract between the Company and the franchisee is executed; additional license revenue is received in installments over a period of up to five years. The performance obligation related to the sale of a franchisee license is met over the terms of the franchise agreement.
Source: Item 23 — RECEIPTS (FDD pages 47–204)
What This Means (2025 FDD)
According to the 2025 Floors To Go Franchise Disclosure Document, the company recognizes revenue from the sale of franchisee licenses in two phases. Floors To Go recognizes a portion of the revenue at the time the franchise contract is executed. The remaining license revenue is received in installments over a period of up to five years.
Floors To Go recognizes the performance obligation related to the sale of the franchisee license over the term of the franchise agreement. This means that the revenue recognition is tied to the ongoing fulfillment of the franchise agreement terms, rather than recognizing the entire revenue upfront.
This approach to revenue recognition is common in franchising, as the franchisor's obligations extend beyond the initial sale of the franchise. The franchisee should understand the terms of the franchise agreement to fully understand the obligations of both parties.