Initial franchise fee revenue should be recognized when all material services or conditions relating to the sale have been substantially performed by the franchisor.

Question

Quizplus · Accepted Answer

This is in accordance with the revenue recognition principles of generally accepted accounting principles (GAAP). The franchisor can recognize the initial franchise fee revenue once they have completed all the necessary obligations such as providing training, site selection and assisting with construction, among others. This ensures that revenue is recognized only when the franchisor has substantially completed providing all the services and conditions necessary for the franchisee to begin operating under the franchise agreement.

Initial Franchise Fee Revenue Should Be Recognized When All Material