What was the change in 'Contract Liability' for Aw in 2022?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
during the audit.
Muhammad Zubairy, CPA PC Westbury, NY June 6, 2024
BALANCE SHEETS RAYYAN PIZZA FRANCHISE LLC
| ASSETS | ||
|---|---|---|
| YEARS ENDED DECEMBER 31 | ||
| 2023 | 2022 | |
| Assets | ||
| Cash | $ 4,705 | $ 33,561 |
| Due from franchisee | 7,837 | 1,226 |
| Due from related parties | 51,502 | 51,502 |
| Total Assets | $ 64,044 | $ 86,289 |
| LIABILITIES AND MEMBERS' EQUITY (DEFICIT) | ||
| Current Liabilities | ||
| Accounts payable and accrued expenses | $ — | $ 4,834 |
| Loan payable SBA | 513 | 476 |
| Loan payable WinTrust | 10,073 | 10,073 |
| Contract Liability | 8,000 | 8,250 |
| Total Current Liabilities | 18,586 | 23,633 |
| Long Term Liabilities | ||
| Loan payable S |
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 39)
What This Means (2025 FDD)
According to Aw's 2025 Franchise Disclosure Document, the company's 'Contract Liability' decreased by $250 in 2022. The 'Contract Liability' was $8,250 in 2022, compared to $8,000 in 2023. This liability refers to non-refundable franchise fees that Aw has received but not yet earned as of the end of the financial year, which are treated as deferred revenues. These revenues are recognized over the life of the franchise agreement.
This change in contract liability could be due to several factors, such as recognizing more revenue from franchise fees during 2023 compared to 2022, or changes in the number of new franchises sold. For a prospective Aw franchisee, this indicates how the company handles its franchise fees and recognizes revenue over time. It also shows a slight decrease in deferred revenue, which could reflect changes in sales or revenue recognition practices.
It's important to note that the notes to the financial statements further clarify that the non-refundable franchise fees received but not yet earned as of December 31, 2023, and 2022, were $25,500 and $33,750 respectively. This amount differs from the 'Contract Liability' listed in the balance sheets, suggesting that the 'Contract Liability' line item may only represent a portion of the total deferred revenue related to franchise fees. A potential franchisee should seek clarification from Aw regarding the discrepancy between these figures to fully understand the company's revenue recognition policies and financial obligations.