Prior to 2024, when did Focus Cfo recognize revenue from the sale of a franchise or license?
Focus_Cfo Franchise · 2025 FDDAnswer from 2025 FDD Document
During 2024, the Company implemented a change in accounting principle related to the recognition of revenue from the sale of franchises and licenses in accordance with ASC 606. Previously under the ASC, the Company determined there was only one performance obligation under the franchise and license agreement which was the completion of an initial training by the new franchisee/licensee. The Company therefore previously recognized revenue from the sale of a franchise or license once the initial training had been completed by the franchisee/licensee. The initial training was required to be completed within two weeks of the signing of the agreement. The Company determined due to changes in the franchise and license agreements in 2023 that there are now two performance obligations: 1) providing an initial training program for new franchisees/licensees and 2) ongoing support of the FocusCFO System and FocusCFO Resources during the term of the agreement. Therefore, the portion of the fee under the agreement allocated to training is recognized as revenue within two days of executing their agreement when the training program is made available to the franchisee/licensee. The portion of the fee under the agreement that is allocated to the initial franchise/license fee is recognized as revenue over the duration of the agreement which is 10 years.
Source: Item 23 — Receipts (FDD pages 37–126)
What This Means (2025 FDD)
According to Focus Cfo's 2025 Franchise Disclosure Document, prior to 2024, Focus Cfo recognized revenue from the sale of a franchise or license once the initial training had been completed by the new franchisee or licensee. This initial training was required to be completed within two weeks of signing the agreement.
This previous accounting method considered only the initial training as the single performance obligation. Consequently, Focus Cfo recognized the entire franchise or license fee as revenue immediately upon completion of this training. This is a more aggressive revenue recognition policy than the one they adopted in 2024.
In 2024, Focus Cfo implemented a change in accounting principle related to the recognition of revenue from the sale of franchises and licenses in accordance with ASC 606. The company determined that there were now two performance obligations: providing an initial training program for new franchisees/licensees and ongoing support of the FocusCFO System and FocusCFO Resources during the term of the agreement. Therefore, the portion of the fee under the agreement allocated to training is recognized as revenue within two days of executing their agreement when the training program is made available to the franchisee/licensee. The portion of the fee under the agreement that is allocated to the initial franchise/license fee is recognized as revenue over the duration of the agreement which is 10 years.