When does Gold Star recognize royalty and advertising revenue from franchisees?

According to Gold Star's 2025 Franchise Disclosure Document, royalty and advertising revenue is recognized when the franchisee's reported sales occur. This is referred to as revenue recognition at a "point in time." Depending on the timing within a period, this recognition of revenue results in either an unbilled receivable (contract asset) or, once billed, a royalty receivable on the balance sheet. The royalty revenue percentage ranges from 1% to 6% of franchise store revenue, while the advertising revenue percentage is 0.5%.

For a prospective Gold Star franchisee, this means that Gold Star accounts for royalties and advertising fees based on when the franchisee makes a sale. The franchisee's reported sales figures directly trigger the revenue recognition for these fees. The specific percentage paid for royalties can vary between 1% and 6%, so it's important to clarify the exact percentage in the Franchise Agreement. The advertising fee is a fixed 0.5% of gross sales.

This accounting practice is fairly standard in the franchise industry, where franchisors typically collect royalties and advertising fees as a percentage of gross sales. The "point in time" recognition aligns the revenue with the franchisee's sales activity. Franchisees should maintain accurate sales records, as these figures directly impact the royalties and advertising fees owed to Gold Star. Franchisees should also be aware of how unbilled receivables and royalty receivables are handled on Gold Star's balance sheet, as this can affect financial reporting and transparency.