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Revenue for franchisors

Industry Supplement | April 2021

Latest edition: Our guide to the implementation of ASC 606 for franchisors.

This April 2021 edition expands on our existing ASC 606 guidance for franchisors to incorporate insights on the adoption of ASU 2021-02, which simplifies how private company franchisors analyze certain activities when determining their performance obligations in a franchise agreement.

Relevant dates for the adoption of ASC 606

Effective datePublic business and certain other entities*Other entities that had not issued (made available for issuance) financial statements as of June 3, 2020**

Annual periods – Fiscal years beginning after       


Dec. 15, 2019

Interim periods – In fiscal years beginning after 


Dec. 15, 2020

Early adoption allowed in fiscal years beginning after

Dec. 15, 2016

* (1) public business entities; (2) not-for-profits that have issued, or are conduit bond obligors for, securities that are traded, listed or quoted on an exchange or an over-the-counter market; (3) employee benefit plans that file financial statements with the SEC; and (4) other entities that issued (made available for issuance) financial statements reflecting the adoption of Topic 606 before June 3, 2020.

** ASU 2020-05 deferred the effective date for those specific other entities by one year.

 Relevant dates for the adoption of ASC 2021-02

Nonpublic business entitiesEffective dates

Franchisors that have adopted Topic 606               

Annual and interim reporting periods after December 15, 2020

Franchisors that have not yet adopted Topic 606

Apply transition provisions and effective dates for Topic 606 above, using the full retrospective method

Key impacts

  • Entirely new accounting model that may affect the timing of revenue recognition, in particular for upfront fees
  • Sales-based royalties will usually be recognized when franchisee sales occur
  • Performance obligations are the new unit of account. Upfront activities and ongoing goods or services to franchisees may be affected
  • Accounting for advertising fund contributions and expenses will change for most franchisors
  • New framework for assessing franchise contracts modifications and transfers

Download the documents :

Revenue for franchisors

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Michael Kraehnke
Partner, Dept. of Professional Practice, KPMG US
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Meredith Canady
Partner, Dept. of Professional Practice, KPMG US

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