How is royalty revenue recognized for Gokhale Method courses?
Gokhale_Method Franchise · 2024 FDDAnswer from 2024 FDD Document
Royalty revenue pertains to a pre-determined amount or percentage for each course taught based on the type of course taught and the number of participants. For royalties, revenue is recognized when students participate in the class. For many of these classes, the payment is processed or collected by GME or the teacher. If the payment is collected by GME, the royalties due to GMI on these classes are periodically remitted to GMI by GME. If the payment is collected by the teacher, GMI will record revenue for the net royalty due.
Source: Item 22 — CONTRACTS (FDD page 34)
What This Means (2024 FDD)
According to Gokhale Method's 2024 Franchise Disclosure Document, royalty revenue is tied to the courses taught by franchisees. The royalty is a pre-determined amount or percentage that varies based on the type of course and the number of students participating. Gokhale Method recognizes this revenue when students actively participate in the class.
The FDD specifies that payments for these classes can be processed either by Gokhale Method Enterprises, Inc. (GME) or by the individual teacher (franchisee). When GME collects the payment, they periodically remit the royalties due to Gokhale Method Institute, Inc. (GMI). However, if the franchisee collects the payment directly, GMI records revenue only for the net royalty amount that is due to them.
This accounting practice means that a Gokhale Method franchisee's royalty obligations are directly linked to their teaching activity and student enrollment. The revenue recognition method ensures that Gokhale Method only accounts for royalty revenue once the service (the class) has been provided to the student. This is a standard practice in franchising, where revenue recognition is often tied to the delivery of services or products to the end customer.
Prospective franchisees should understand the specific royalty rates for each type of Gokhale Method course they plan to offer, as these rates directly impact their revenue and remittance obligations. It is also important to clarify the process for payment collection and royalty remittance to ensure accurate financial reporting and compliance with Gokhale Method's accounting policies.