Over what period does Gold Star recognize franchise fees as revenue?

According to Gold Star's 2025 Franchise Disclosure Document, franchise fees are recognized as revenue ratably on a straight-line basis over the term of the franchise agreement, starting from the restaurant opening date. This means that Gold Star does not recognize the entire franchise fee as revenue immediately upon receipt. Instead, the revenue recognition is spread out evenly over the duration of the franchise agreement.

Since the franchise fees are typically received in cash at or near the beginning of the franchise term, Gold Star initially records the cash received as deferred revenue, which is a contract liability. This deferred revenue is then recognized as actual revenue gradually over time, aligning with the service provided to the franchisee throughout the franchise term. This accounting practice ensures that revenue recognition matches the ongoing support and brand access provided to the franchisee.

For a prospective Gold Star franchisee, this accounting practice has no direct impact on their day-to-day operations. However, it's important to understand that Gold Star's financial statements will reflect this deferred revenue, which can provide insights into the company's financial health and stability. Additionally, franchisees should be aware that the franchise term dictates the period over which Gold Star recognizes the initial franchise fee as revenue.