As of December 31, 2022, what was the amount of non-refundable franchise fees received but not yet earned by Aw?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
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4. CONTRACT LIABILITIES
In compliance with the Financial Accounting Standards Board ("FASB") new accounting standards for revenue recognition ("Topic 606"), the Company records its non-refundable franchise fees, net of amounts earned based on allowable direct services, as deferred revenues, to be recognized over the life
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 39)
What This Means (2025 FDD)
According to Aw's 2025 Franchise Disclosure Document, as of December 31, 2022, the non-refundable franchise fees received but not yet earned were $33,750. These fees are recorded as deferred revenues and are recognized over the life of the franchise agreement. This accounting practice complies with Financial Accounting Standards Board (FASB) standards for revenue recognition.
For a prospective Aw franchisee, this means that Aw has collected $33,750 in franchise fees that it has not yet recognized as earned revenue as of the end of 2022. This liability represents Aw's obligation to provide services or fulfill other requirements under the franchise agreement for which the fees have been paid. The fees will be recognized as revenue as Aw fulfills its obligations over the term of the franchise agreement.
It is typical in the franchise industry to defer recognition of franchise fees until the franchisor has performed its initial services. This protects the franchisee, as the franchisor has a financial incentive to provide the services. A prospective franchisee should inquire about the specific services that trigger revenue recognition and the timeline over which the franchise fees are earned.