How do you record the purchase of a franchise?

Answer 1

For purposes of US GAAP, payments made for an initial investment in a franchise are capitalized as a long-lived intangible asset. These can be capitalized and then amortized over the life of the franchise agreement.

Franchise royalties and other maintenance costs paid periodically should be expensed in the period they are used, and not necessarily in the period paid. For example, if a franchisor makes an annual payment in December 2012 to cover 2013 royalties, that payment should be expensed in 2013.