What was the total amount of franchising revenues for Monicals Pizza in the most recent year presented?
Monicals_Pizza Franchise · 2025 FDDAnswer from 2025 FDD Document
Royalty Fees - The Company receives royalty fees, ranging from one percent to four percent of franchisees' sales. Since ongoing franchise royalty fees are based on actual franchise restaurant sales, the fees will fluctuate and are considered variable consideration. ASC 606 requires variable consideration to be estimated. However, there is an exception to this requirement for sales-based royalties related to licenses of intellectual property. These fees are recognized as revenue when sales are generated by the franchisees and comprise the entire franchising revenue amount in the accompanying consolidated financial statements for the years ended December 31, 2024 and 2023.
Initial Franchise Fees – When a new franchise is sold, the Company grants the franchisee a license to own and operate a franchised restaurant. As part of this license, the Company agrees to provide certain services to the franchisee. Generally, these services include assistance in site selection, training personnel, implementation of an accounting system, and design of a quality control program. Franchise agreements are valid for five years and during that time, the franchisee is allowed to use the Monical's name, recipes and menu. When the franchise agreement expires, the franchisee must pay an additional franchise fee to renew the agreement; however, at its discretion, the Company may waive the renewal fee.
In accordance with ASU 2021-02, initial franchise fees are recognized when the services and conditions relating to the sale of the franchise are substantially performed or satisfied by the Company. The services and conditions required to be performed or satisfied by the Company principally include site selection approval, equipment specification assistance and training assistance. Franchise fees received prior to substantial performance by the Company are deferred. Substantial performance is normally deemed to have occurred when the related franchise location opens for business. There were no initial franchise fees included within franchising revenue in the accompanying consolidated financial statements for the years ended December 31, 2024 and 2023.
Source: Item 23 — RECEIPTS (FDD pages 46–257)
What This Means (2025 FDD)
According to Monicals Pizza's 2025 Franchise Disclosure Document, the franchise's franchising revenue is comprised of royalty fees, which range from 1% to 4% of franchisees' sales. These fees are considered variable consideration and are recognized as revenue when sales are generated by the franchisees.
For the years ending December 31, 2024 and 2023, the royalty fees comprised the entire franchising revenue amount in the consolidated financial statements. The document states that there were no initial franchise fees included within franchising revenue for the years ended December 31, 2024 and 2023.
While the document clarifies how franchising revenues are generated and recognized, it does not specify the exact total amount of franchising revenues Monicals Pizza received for the year 2024. A prospective franchisee should inquire directly with Monicals Pizza about the specific franchising revenue amounts for 2024 to gain a clearer understanding of the company's financial performance in this area.