When does Moes Southwest Grill recognize development fees as revenue?

According to Moe's Southwest Grill's 2025 Franchise Disclosure Document, development fees are initially recorded as deferred franchise revenue upon receipt. Moe's Southwest Grill recognizes these fees as revenue on a straight-line basis over the term of the underlying franchise agreement.

This revenue recognition commences when the specific Moe's Southwest Grill restaurant (referred to as an SBR, or store, bakery, restaurant) is opened. This means that the initial development fee paid by the franchisee is not immediately recognized as income by Moe's Southwest Grill but is instead spread out over the duration of the franchise agreement, which is typically a period of 10 to 20 years once the store is opened.

For a prospective franchisee, this accounting practice means that Moe's Southwest Grill recognizes revenue gradually as the franchisee operates their business. The FDD also states that deferred revenue of $29,819 relates to the unsatisfied future performance obligations associated with unopened SBRs. This deferred revenue is not included within the table provided in the FDD. Moe's Southwest Grill anticipates recognizing revenue over the terms of the respective franchise agreements, which are typically 10-20 years, once the related SBRs are opened.

This approach is common in the franchise industry, as it aligns the revenue recognition with the ongoing support and brand usage provided to the franchisee throughout the term of the agreement. The deferred revenue is recognized once the SBR is opened.