What was the franchise fee revenue for Aw in 2023?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
| YEARS ENDING DECEMBER 31 | ||||
|---|---|---|---|---|
| 2023 | 2022 | |||
| Revenues | ||||
| Franchise fee revenue | $ 8,250 | $ 8,250 | ||
| Royalties | 203,473 | 240,600 | ||
| Total Revenue | 211,723 | 248,850 | ||
| Operating Expenses | 75,326 | 80,169 | ||
| Net Income | 136,397 | 168,681 | ||
| Members' Equity (Deficit) - Beginning | 11,732 | (10,313) | ||
| Members' (Distributions) | (147,512) | (146,636) | ||
| Members' Equity (Deficit) - Ending | $ 617 | $ 11,732 |
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 of the franchise agreement. The non-refundable franchise fees received but not yet earned as of December 31, 2023, and 2022, were $25,500 and $33,750 respectively.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 39)
What This Means (2025 FDD)
According to Aw's 2025 Franchise Disclosure Document, the franchise fee revenue for the year ending December 31, 2023, was $8,250. This figure represents the income Aw received from initial franchise fees paid by new franchisees. Franchise fee revenue is a crucial indicator of Aw's growth and ability to attract new franchisees.
It's important to note that Aw recognizes revenue in accordance with accounting standards issued by the Financial Accounting Standards Board (FASB). Specifically, Aw follows Topic 606, which pertains to revenue from contracts with customers. This means that Aw may defer recognition of franchise fees over the life of the franchise agreement, especially if the fees are tied to ongoing services provided to the franchisee.
Furthermore, the FDD states that as of December 31, 2023, Aw had $25,500 in non-refundable franchise fees that were received but not yet earned. This deferred revenue is recognized over the life of the franchise agreement. This accounting practice affects how Aw reports its financial performance and could impact the perceived profitability of the franchise in any given year.
Prospective franchisees should consider these accounting practices when evaluating Aw's financial statements. Understanding how franchise fees are recognized as revenue can provide a more accurate picture of the company's financial health and sustainability.