How are service fees from Floors To Go franchisees recognized?
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.
Source: Item 23 — RECEIPTS (FDD pages 47–204)
What This Means (2025 FDD)
According to Floors To Go's 2025 Franchise Disclosure Document, revenues are 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.
Floors To Go identifies the intellectual property license to the company's programs, registered trademarks and name, service fees, and member advertising fees as one performance obligation in connection with the franchise contracts. The service fees are monthly charges for training and other support services recognized when invoiced.
Deferred revenue represents amounts received from both franchisees and manufacturers for participation in an annual convention, which is sponsored by Floors To Go. These amounts will be recognized as revenue when the convention is held and the related expenses incurred. Floors To Go also records deferred revenue for amounts received from franchisees for member advertising fees, and revenue for these services will be recognized over the terms of the franchise agreement and the related expenses are incurred.
In summary, Floors To Go recognizes service fees from franchisees as revenue when invoiced, as these fees are monthly charges for training and support services. However, member advertising fees are recognized over the term of the franchise agreement, and convention fees are recognized when the convention occurs.