What are the two performance obligations in both the Focus Cfo franchise and license agreement?
Focus_Cfo Franchise · 2025 FDDAnswer from 2025 FDD Document
services to be performed the following month, but clients do sometimes pay in advance. As of December 31, 2024 client prepayments were $7,975 (no client prepayments at December 31, 2023) and were included in other current liabilities on the balance sheet.
The sale of a franchise is under a franchise agreement entered into between the Area President franchisee and the Company. The sale of a license is under a license agreement entered into between the CFO licensee and the Company. The fee under both of these agreements is due upon signing the agreement. The fee may be fully or partially refundable based on certain criteria set forth in the agreement. The fee in both agreements is comprised of two components: a training fee and an initial franchise/license fee. The initial term of both the franchise and license agreement is ten years. Franchisees and licensees have the option to renew their agreement at the end of the initial term based on meeting certain criteria as set forth in the agreement and executing the then-current franchise or license agreement. 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.
As of December 31, 2024 and 2023, the Compan
Source: Item 23 — Receipts (FDD pages 37–126)
What This Means (2025 FDD)
According to the 2025 Focus Cfo Franchise Disclosure Document, both the franchise agreement for Area Presidents and the license agreement for CFO licensees include two primary performance obligations. These obligations are: providing an initial training program for new franchisees or licensees, and offering ongoing support for the FocusCFO System and Resources throughout the term of the agreement. These obligations dictate how Focus Cfo recognizes revenue from franchise and license fees.
Focus Cfo recognizes revenue from the sale of a franchise or license in two stages that correspond to the performance obligations. The training fee revenue is recognized once the initial training program has been provided to the franchisee or licensee, which typically occurs within two days of executing the agreement. This means Focus Cfo considers the training complete and revenue earned shortly after the agreement is signed and the training is delivered.
The initial franchise or license fee is recognized as revenue gradually over the ten-year term of the agreement, as Focus Cfo provides ongoing support for the FocusCFO System and Resources. This approach reflects that the value of the franchise or license is delivered continuously throughout the agreement term, not just at the outset. As of December 31, 2024 and 2023, Focus Cfo had unearned franchise and license fees of $377,055 and $136,800, respectively, which represents the portion of initial fees allocated to future support obligations. The current portion of the unearned revenue is included in other current liabilities, while the long-term portion is included in other long term liabilities.