Burger Buddy Restaurants grants area franchises to operate up to two restaurants within a 100 square mile
Question:
Burger Buddy Restaurants grants area franchises to operate up to two restaurants within a 100 square mile area. The Uniform Franchise Offering Circular reveals that, following payment of the lump sum fee. Burger Buddy agrees to assist in selecting franchise locations and obtaining financing, negotiate lease terms for existing structures or construction costs for a new building, and provide both initial management training and periodic on-site consultation. The area franchise fee can be refunded. To date, no area franchisees have either reneged on the franchise agreements or gone out of business.
In most markets. Burger Buddy ranks at least fourth in market-wide fast food revenue. The product line consists of beef, fish, and poultry-based sandwiches and a full service salad bar.
Required:
Identify, and explain the motive for, the key questions an auditor would address to judge when area franchise fees may be recognized as revenue.
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