How does Moes Southwest Grill recognize franchise fees as revenue?
Moes_Southwest_Grill Franchise · 2025 FDDAnswer from 2025 FDD Document
Development fees are recorded as deferred franchise revenue when received and are recognized as revenue on a straight-line basis over the term of each underlying franchise agreement satisfying the development obligation, commencing when the SBR is opened.
Franchise fees are recorded as deferred revenue when received and are recognized as revenue on a straight-line basis over the term of each respective franchise agreement, commencing when the SBR is opened.
Source: Item 23 — Receipts (FDD pages 92–334)
What This Means (2025 FDD)
According to Moes Southwest Grill's 2025 Franchise Disclosure Document, both development and franchise fees are initially recorded as deferred revenue upon receipt. This means Moes Southwest Grill doesn't immediately count these fees as earned income. Instead, they recognize the revenue gradually over the term of the franchise agreement.
Specifically, Moes Southwest Grill recognizes these fees on a straight-line basis, which means an equal amount of revenue is recognized each period (e.g., monthly or annually) throughout the life of the franchise agreement. This recognition begins once the specific Moes Southwest Grill restaurant (referred to as an "SBR" in the FDD) is opened.
This accounting practice is common in the franchise industry because the initial fees often cover ongoing support and brand usage rights provided throughout the franchise term, rather than being earned all at once upfront. For a prospective franchisee, this revenue recognition method indicates that Moes Southwest Grill views the franchise fee as payment for services and rights provided over the long term, aligning the franchisor's revenue with the franchisee's operational period.