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Pizza Inn Holdings, Inc. Message Board

  • jsteveco730 jsteveco730 Jul 27, 2013 9:47 AM Flag

    Whne PZZI collects franchise revenues

    does it apply to their income statements? I tend to think it does and if so, then PZZI could see a significant upside if all new franchise agreements result in an initial payment of 50% total cost to own. Just to speculate, if 70 agreements are signed and at 50% franchise cost to get site development process moving then PZZI revenues tis quarter alone are around $13M.

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    • I highly doubt that they have to come to the table with the upfront fees in advance. If you thought that this was worthy of posting, instead of speculating, you would have done some research. I'm sure the funding for these multiple unit deals is channeled through some hedge fund.

      I read where the guy in Florida , thought the build out cost per store was near $400K per store. So the timing of payments is important to the franchisee and I'm sure not all front loaded as you posted. If you had a thought like this, you know there's the world wide web and with a little effort, I'm sure you could have found some supporting evidence to point at.

      Sentiment: Strong Buy

    • In other words, does PZZI pick up credit to report their income from a franchise fee at the initial agreement or when all services are services that relate to the franchise contract are performed?

      • 1 Reply to jsteveco730
      • I stand corrected. Found this item. But I'm sure they have to recognized the revenues in the period that they happen. They may carry it as fees unrecognized? Or something like that.

        Here is an article about multiple units.

        But first let’s revisit your franchise contract. Most multi-unit franchise contracts have what’s called a development schedule. This means that you agree to open a new store on this date every year, or sometimes every year and a half. It depends on the franchisor. The point is that you can’t just open another store when you are totally comfortable doing so. You own a geographical area when you sign a multi-unit agreement up front. The franchisor cannot let anyone else open a store in your protected area. You are obligated to open a certain number of stores in a certain amount of time.

        One great thing about signing a multi-unit agreement up front is that in most cases, the franchise fee is discounted for every unit you agree to open after your first one. But, you pay all the franchise fees up-front, not as you go. Still, it’s a nice deal for both parties. The franchisor locks up a certain geographical area that he or she knows will have a certain number of units, and the franchisee gets a discount, and a great opportunity to own an area.

        Sentiment: Strong Buy

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