When does Southern Steer recognize revenue from the initial plan contract with a franchisee?
Southern_Steer Franchise · 2025 FDDAnswer from 2025 FDD Document
- Recognize Revenue: The company recognizes revenue, from Initial plan contract, in the month the franchisee opens its locations.
The company sells territories to prospective franchisees. Sales for the year ended September 30, were as follows:
Source: Item 5 — and 7 of the FDD, Section 3.1 of the Franchise Agreement and Section 4.1 of the Multi-Unit Development Agreement are hereby amended to state that payment of the initial franchise fee and development fee will be deferred until We have satisfied Our pre-opening obligations, and You have commenced business operations. (FDD pages 168–290)
What This Means (2025 FDD)
According to Southern Steer's 2025 Franchise Disclosure Document, the company recognizes revenue from the initial plan contract in the month the franchisee opens their location. The initial franchise territory sale is earned over time as performance obligations are met. These obligations include certifying the franchisee in Southern Steer's standards and providing assistance in the design, branding, and training for the services offered.
The contract involves Southern Steer Franchising International, LLC, and the prospective franchisees. The initial cost is $49,500 for the first location, $35,000 for a second, and $25,000 for each additional location. In return, the franchisee receives training, national advertising, and the right to use Southern Steer's trademarks.
Southern Steer allocates the entire purchase price for certification as one performance obligation, indicating that all pre-opening obligations are considered a single unit of performance. This means that the revenue recognition is tied directly to the opening of the franchise location, simplifying the accounting process for the initial franchise fee.