What was the total contract liability for Aw at the end of 2023?
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 total contract liability at the end of 2023 was $25,500. This amount is comprised of two components: a current contract liability of $8,000 and a long-term contract liability, net of current, of $17,500. These figures appear in the balance sheet for the year ended December 31, 2023.
The contract liability represents non-refundable franchise fees that Aw has received but not yet earned as of the end of the year. Aw recognizes these fees as revenue over the life of the franchise agreement, in compliance with accounting standards for revenue recognition. The current portion of the contract liability ($8,000) represents the amount expected to be recognized as revenue within the next year, while the long-term portion ($17,500) will be recognized in subsequent years.
For a prospective Aw franchisee, this deferred revenue recognition means that Aw isn't immediately recognizing all franchise fees as income. Instead, they are spreading the recognition over the term of the franchise agreement. This accounting practice can provide a more accurate picture of Aw's financial performance over time, as it aligns revenue recognition with the delivery of services and support to franchisees. Franchisees should understand that this liability reflects Aw's obligation to provide ongoing services for which they've already been paid.