How does Floors To Go recognize revenue from service fees charged to franchisees?
Floors_To_Go Franchise · 2025 FDDAnswer from 2025 FDD Document
differ from those estimates. Significant estimates include, but are not limited to, the franchisee cashback program accruals.
Cash
Cash consists of demand deposits in banks. The Company maintains its deposits in amounts which, at times, may exceed federally insured limits, in one local financial institution. Management does not believe the Company is exposed to any significant interest rate or other financial risk as a result of these deposits.
Revenue Recognition
Revenues are primarily derived from service fees, member advertising fees, and brokerage fees from certain floor and window covering manufacturers utilized by the franchisees. The performance obligation related to these services is met over the terms of the franchise agreement. In certain circumstances fees collected are deferred and recognized over time as the related performance obligations are satisfied.
We identified the following services as one performance obligation in connection with the franchise contracts:
- Intellectual Property (IP) license to the Company's programs, registered trademarks and name.
- Service fees are monthly charges for training and other support services recognized when invoiced.
- Member advertising fees consist of annual charges for advertising and marketing materials.
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, Floors To Go primarily derives revenues from service fees, member advertising fees, and brokerage fees from certain floor and window covering manufacturers utilized by the franchisees. The performance obligation related to these services is met over the terms of the franchise agreement. In certain circumstances, fees collected are deferred and recognized over time as the related performance obligations are satisfied.
Floors To Go identifies specific services connected to franchise contracts, including an Intellectual Property (IP) license to the Company's programs, registered trademarks and name. Service fees are monthly charges for training and other support services recognized when invoiced. Member advertising fees consist of annual charges for advertising and marketing materials.
Brokerage fees from certain floor and window covering manufacturers utilized by the franchisees are recognized monthly based on the total amount of purchases made by the member franchisees and the terms of the contract. The performance obligation for the franchisees and manufacturers are considered to be met over the terms of the franchise agreement.
Deferred revenue represents amounts received from both franchisees and manufacturers for participation in an annual convention, which is sponsored by the Company. These amounts will be recognized as revenue when the convention is held and the related expenses incurred. The Company also records deferred revenue for amounts received from franchisees for member advertising fees. Revenue for these services will be recognized over the terms of the franchise agreement and the related expenses are incurred.