What is the main difference between franchise fees receivable and deferred revenue for Apricot Lane?
Apricot_Lane Franchise · 2025 FDDAnswer from 2025 FDD Document
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NOTE 5 - FRANCHISE FEES RECEIVABLE AND DEFERRED FRANCHISE FEES
Franchise fees totaling $222,000 and $207,000 were receivable at December 31, 2024 and 2023 respectively. Franchise fees received as income from new store openings in 2024 and 2023 were $732,500 and $994,000 respectively. In accordance with the Company's accounting policy described in Note 1, recognition of such fees as revenue is deferred until the store opens. As a result, the Company had
Source: Item 23 — RECEIPTS (FDD pages 51–222)
What This Means (2025 FDD)
According to Apricot Lane's 2025 Franchise Disclosure Document, franchise fees receivable represent the total amount of franchise fees that are outstanding or have not yet been collected by Apricot Lane. For example, at the end of 2024, Apricot Lane had $222,000 in franchise fees receivable. These are fees that franchisees owe to Apricot Lane but have not yet paid. In contrast, deferred revenue represents franchise fees that Apricot Lane has already received but cannot recognize as income yet.
Apricot Lane's accounting policy, as detailed in Note 1, states that franchise fees are recognized as revenue only when all required services under the franchise agreement have been completed, which typically occurs when the franchisee's store opens. The services include site selection, lease negotiation, marketing, franchisee and employee training, and store opening assistance. Until the store opens and these services are rendered, the received franchise fees are classified as deferred revenue.
As an example, Apricot Lane had $316,500 in deferred revenue at the end of 2024. This means they had already received this amount in franchise fees, but the corresponding stores had not yet opened, so the revenue recognition was deferred. In simpler terms, franchise fees receivable are what franchisees still owe Apricot Lane, while deferred revenue is what Apricot Lane has already collected but hasn't yet earned according to accounting standards. This distinction is important for understanding Apricot Lane's financial statements and revenue recognition practices.