Revenue Recognition
Contract Liabilities
Contract liabilities consist of deferred revenue resulting from initial and renewal franchise fees paid by franchisees, as well as upfront fees paid by master franchisees, which are generally recognized on a straight-line basis over the term of the underlying agreement. We may recognize unamortized franchise fees and upfront fees when a contract with a franchisee or master franchisee is modified and is accounted for as a termination of the existing contract. We classify these contract liabilities as Other liabilities, net in our consolidated balance sheets. The following table reflects the change in contract liabilities on a consolidated basis between December 31, 2024 and December 31, 2025 (in millions):
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| Balance at December 31, 2024 | | $ | 517 | |
| Recognized during period and included in the contract liability balance at the beginning of the year | | (59) | |
| Increase, excluding amounts recognized as revenue during the period | | 55 | |
| Effective settlement of pre-existing contract liabilities in connection with BK China Acquisition | | (17) | |
| Impact of foreign currency translation | | 21 | |
| Balance at December 31, 2025 | | $ | 517 | |
The following table illustrates estimated revenues expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) on a consolidated basis as of December 31, 2025 (in millions):
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| 2026 | | $ | 53 | |
| 2027 | | 51 | |
| 2028 | | 48 | |
| 2029 | | 45 | |
| 2030 | | 42 | |
| Thereafter | | 278 | |
| Total | | $ | 517 | |
Disaggregation of Total Revenues
The following tables disaggregate revenue by segment (in millions). Totals in the following tables may not calculate exactly due to rounding.
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| 2025 |
| TH | | BK | | PLK | | FHS | | INTL | | RH | | ELIM (a) | | Total |
| Supply chain sales | $ | 2,909 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 2,909 | |
| Company restaurant sales | 46 | | | 235 | | | 183 | | | 45 | | | — | | | 1,840 | | | — | | | 2,348 | |
| Royalties | 339 | | | 489 | | | 294 | | | 76 | | | 862 | | | — | | | (82) | | | 1,977 | |
| Property revenues | 627 | | | 218 | | | 15 | | | — | | | 2 | | | — | | | (30) | | | 832 | |
| Franchise fees and other revenue | 29 | | | 16 | | | 16 | | | 37 | | | 52 | | | — | | | — | | | 151 | |
| Advertising revenues and other services | 298 | | | 556 | | | 293 | | | 75 | | | 82 | | | — | | | (85) | | | 1,217 | |
| Total revenues | $ | 4,247 | | | $ | 1,514 | | | $ | 800 | | | $ | 232 | | | $ | 998 | | | $ | 1,840 | | | $ | (197) | | | $ | 9,434 | |
(a)Represents elimination of intersegment revenues that consists of royalties, property and advertising and other services revenue recognized by BK and INTL from intersegment transactions with RH.
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| 2024 |
| TH | | BK | | PLK | | FHS | | INTL | | RH | | ELIM (a) | | Total |
| Supply chain sales | $ | 2,708 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 2,708 | |
| Company restaurant sales | 45 | | | 242 | | | 148 | | | 41 | | | — | | | 1,116 | | | | | 1,592 | |
| Royalties | 332 | | | 484 | | | 300 | | | 71 | | | 803 | | | — | | | (50) | | | 1,940 | |
| Property revenues | 622 | | | 219 | | | 14 | | | — | | | 2 | | | — | | | (20) | | | 837 | |
| Franchise fees and other revenue | 32 | | | 17 | | | 11 | | | 34 | | | 48 | | | — | | | — | | | 142 | |
| Advertising revenues and other services | 301 | | | 488 | | | 295 | | | 68 | | | 82 | | | — | | | (47) | | | 1,187 | |
| Total revenues | $ | 4,040 | | | $ | 1,450 | | | $ | 768 | | | $ | 214 | | | $ | 935 | | | $ | 1,116 | | | $ | (117) | | | $ | 8,406 | |
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| 2023 |
| TH | | BK | | PLK | | FHS | | INTL | | Total |
| Supply chain sales | $ | 2,679 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 2,679 | |
| Company restaurant sales | 46 | | | 97 | | | 89 | | | 39 | | | — | | | 271 | |
| Royalties | 324 | | | 483 | | | 291 | | | 69 | | | 753 | | | 1,920 | |
| Property revenues | 609 | | | 227 | | | 13 | | | — | | | 2 | | | 851 | |
| Franchise fees and other revenue | 22 | | | 20 | | | 10 | | | 31 | | | 49 | | | 132 | |
| Advertising revenues and other services | 292 | | | 470 | | | 289 | | | 48 | | | 70 | | | 1,169 | |
| Total revenues | $ | 3,972 | | | $ | 1,297 | | | $ | 692 | | | $ | 187 | | | $ | 874 | | | $ | 7,022 | |
About Revenue Disclosures
Revenue disclosures under ASC 606 explain how a company identifies performance obligations, allocates transaction prices, and determines when revenue is recognized. This section is essential for understanding whether reported revenue reflects genuine economic activity or aggressive accounting choices. Analysts examine the mix of point-in-time versus over-time recognition, which directly affects revenue timing and comparability.
Key signals: rising contract liabilities (deferred revenue) suggest strong future revenue visibility, while declining contract assets may indicate slowing project milestones. Watch for variable consideration estimates — rebates, returns, and performance bonuses that require management judgment. Significant changes in disaggregated revenue by geography or product line can reveal shifting business mix before it appears in headline numbers. Compare revenue growth against contract liability growth to assess sustainability, and scrutinize any changes in the timing of recognition that coincide with earnings pressure.