What is the single performance obligation in the Gold Star franchise arrangement?

The Company owns and franchises the Gold Star Chili and Tom + Chee restaurant concept. The franchise arrangement for both brands is documented in the form of a franchise agreement. The franchise arrangement between the Company as the Franchisor and the franchisee as the customer requires the Company to perform various activities to support the brand that do not directly transfer goods and services to the franchise, but instead represent a single performance obligation, which is the transfer of the franchise license. The intellectual property subject to the franchise license is symbolic intellectual property as it does not have significant standalone functionality, and substantially all of the utility is derived from its association with the Company's past or ongoing activities. The nature of the Company's promise in granting the franchise license is to provide the franchisee with access to the brand's symbolic intellectual property over the term of license. The services provided by the Company are highly interrelated with the franchise license and as such are considered to represent a single performance obligation.

The transaction price in a standard franchise arrangement primarily consists of (a) initial franchise fees; (b) continuing franchise fees (royalties); and (c) advertising fees. Since the Company considers the licensing of the franchising right to be a single performance obligation, no allocation of the transaction price is required. Additionally, all franchise agreements require franchisees to purchase proprietary chili from the Company.

Source: Item 23 — Receipts (FDD pages 53–163)