For Moes Southwest Grill, over what period are franchise fees recognized as revenue?

According to the 2025 FDD, Moes Southwest Grill records franchise fees as deferred revenue when received. These fees are then recognized as revenue on a straight-line basis over the term of each respective franchise agreement. This revenue recognition begins when the specific Moes Southwest Grill location (SBR) is opened.

For a prospective franchisee, this means that Moes Southwest Grill does not immediately recognize the entire franchise fee as revenue upon payment. Instead, they spread the recognition of this revenue over the life of the franchise agreement, which is typically a period of 10-20 years. This accounting practice aligns the revenue recognition with the period during which the franchisee is operating and benefiting from the franchise.

The FDD also mentions that deferred revenue of $24,501 relates to unsatisfied future performance obligations associated with unopened Moes Southwest Grill locations. The company anticipates recognizing this revenue over the terms of the respective franchise agreements, typically 10-20 years, once the related SBRs are opened. This deferred revenue is not included in the table provided in the excerpt. This indicates that Moes Southwest Grill has a significant amount of revenue that it expects to recognize in the future as new locations open and existing franchise agreements continue.

This accounting treatment is standard in the franchise industry, as it reflects the ongoing support and brand usage provided by the franchisor to the franchisee over the term of the agreement. Prospective franchisees should be aware of this revenue recognition method, as it provides insight into how the franchisor's financial performance is tied to the long-term success of its franchisees.