How does Marble Slab Creamery recognize royalty revenue from franchisees?
Marble_Slab_Creamery Franchise · 2025 FDDAnswer from 2025 FDD Document
Royalties – In addition to franchise fee revenue, the Company collects a royalty calculated as a percentage of net sales from our franchisees. Royalties are recognized as revenue when the related sales are made by the franchisees. Royalties collected in advance of sales are classified as deferred income until earned.
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 100–101)
What This Means (2025 FDD)
According to Marble Slab Creamery's 2025 Franchise Disclosure Document, the company recognizes royalty revenue as franchisees make sales. Marble Slab Creamery collects royalties, which are a percentage of net sales, from its franchisees. This means that the franchisor does not recognize the royalty revenue until the franchisee actually sells the ice cream to customers.
For a prospective franchisee, this accounting practice means that Marble Slab Creamery only earns royalty revenue when the franchisee is actively generating sales. This aligns the franchisor's income with the franchisee's performance. If royalties are collected in advance of sales, Marble Slab Creamery classifies these payments as deferred income until they are earned, which occurs when the franchisee makes the corresponding sales.
In 2024, 2023 and 2022, the royalty revenue was $4,760,000, $5,126,000 and $4,826,000 respectively. This deferred income approach is a standard accounting practice, ensuring that revenue is recognized in the period it is earned, providing a more accurate reflection of the company's financial performance.