How are the renewed franchise fees for Pump It Up recognized for accounting purposes?

According to Pump It Up's 2025 Franchise Disclosure Document, when a franchisee chooses to renew their agreement, they will be charged a nonrefundable renewal fee, similar to the initial franchise fee. For accounting purposes, Pump It Up recognizes these renewed franchise fees ratably on a straight-line basis over the term of the renewed franchise agreement.

This means that Pump It Up does not recognize the entire renewal fee as revenue immediately upon receipt. Instead, the revenue recognition is spread out evenly over the duration of the renewed franchise term. For example, if the renewal fee is $10,000 and the renewal term is 5 years, Pump It Up would recognize $2,000 of revenue each year.

For a prospective Pump It Up franchisee, this accounting practice has no direct financial impact on their business operations. However, it provides insight into how the franchisor manages its revenue recognition and financial reporting. Understanding these accounting practices can help franchisees better assess the financial stability and practices of the Pump It Up franchise system.