Question

Franchise fees should be recognized 1. on the date the contract was signed. 2. when performance obligations are satisfied. 3. on the date the franchise is opened for business. 4. on the date the franchise fee is paid to franchisor.

Answer 1

Answer:

2. when performance obligations are satisfied.

Explanation:

Franchise fee is paid to the franchisor to become part of the franchise.

Obligations by the franchisor are satisfied when:

1. When the franchisor does not have any financial repayments to make.

2. Initial services are all performed, for example some agreements require franchisor to train new franchise staff.

Usually franchise fee is paid upfront, and then regular payments areade by the franchise to the franchisor to remain a member.