Franchisors to Adopt New Accounting Standards for Recognizing Revenue
Under recent guidance from the Financial Accounting Standards Board (FASB), franchisors can only recognize revenue from initial franchise fees in their financial statements after they perform services that are distinct from the franchise agreement. Otherwise, they must recognize the revenue over the term of the agreement. This change can have a significant effect on franchisors’ financial statements, particularly those that are in the start-up or growth phases.
