When is the training fee recognized as revenue by Focus Cfo?
Focus_Cfo Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company has determined that there are two performance obligations in both the franchise and license agreement which are 1) providing the initial training program for new franchisees/licensees and 2) ongoing support of the FocusCFO System and FocusCFO Resources during the term of the agreement. The Company recognizes revenue from the sale of a franchise or license in two stages. The initial training program is made available to the franchisees/licensees within two days of executing their agreement; therefore, the training fee is recognized once the training program has been provided to the franchisee/licensee. Support for the FocusCFO System and FocusCFO Resources is provided throughout the ten-year agreement term, therefore, the initial franchise/license fee is recognized as revenue over the duration of the agreement.
Source: Item 23 — Receipts (FDD pages 37–126)
What This Means (2025 FDD)
According to Focus Cfo's 2025 Franchise Disclosure Document, the company recognizes revenue from the sale of a franchise or license in two stages. The initial training program is made available to the franchisees/licensees within two days of executing their agreement. Therefore, Focus Cfo recognizes the training fee as revenue once the training program has been provided to the franchisee/licensee.
This means that Focus Cfo recognizes the training fee as revenue shortly after the franchisee signs the agreement and gains access to the training program. This is a notable change from their previous accounting policy, where revenue was recognized upon completion of the training. The initial franchise/license fee is recognized as revenue over the duration of the agreement, which is 10 years.
For a prospective franchisee, this revenue recognition policy indicates that Focus Cfo recognizes the training fee portion of the franchise fee relatively quickly. This may align Focus Cfo's interests with providing the training promptly. The remaining portion of the initial franchise fee, however, is recognized over the ten-year term of the agreement, which is a common practice that reflects the ongoing support and brand usage provided to the franchisee.