What do contract costs consist of for Bft?
Bft Franchise · 2025 FDDAnswer from 2025 FDD Document
o performance obligations that were unsatisfied (or partially unsatisfied) as of December 31, 2024. The expected future recognition period for deferred franchise development fees related to unopened studios is based on management's best estimate of the beginning of the franchise license term for those studios. The Company elected to not disclose short term contracts, sales and usage-based royalties, marketing fees and any other variable consideration recognized on an "as invoiced" basis.
| Contract liabilities to be recognized in revenue in | Amount | |-----------------------------------------------------|---------------| | 2025 | $ 9,845 | | 2026 | 10,091 | | 2027 | 10,890 | | 2028 | 11,572 | | 2029 | 11,028 | | Thereafter | 52,483 $ 105,909 | The following table reflects the components of deferred revenue:
| December 31, | |||
|---|---|---|---|
| 2024 | 2023 | ||
| Franchise and area development fees | $ 105,909 | $ | 121,238 |
| Non-current portion of deferred revenue | 96,064 | 111,320 | |
| Current portion of deferred revenue | $ 9,845 | $ | 9,918 |
Contract costs – Contract costs consist of deferred commissions resulting from franchise and area development sales by thi
Source: Item 23 — RECEIPTS (FDD pages 79–265)
What This Means (2025 FDD)
According to Bft's 2025 Franchise Disclosure Document, contract costs primarily consist of deferred commissions. These commissions arise from franchise and area development sales made by third-party brokers and Bft's sales personnel. When a franchise is sold, the total commission is deferred, meaning it is not immediately recognized as an expense. Instead, the commission is spread evenly across the number of studios purchased under the development agreement.
The amortization process, or the gradual expensing of the commission, begins when a subsequent franchise agreement is executed. The commissions are then recognized on a straight-line basis over the initial ten-year franchise agreement term. This aligns the recognition of the commission expense with the recognition of the franchise agreement or area development fees, providing a consistent accounting treatment over the life of the agreement.
Bft classifies these deferred contract costs as either current or noncurrent deferred costs on its consolidated balance sheets. As of December 31, 2024, the company had approximately $3,814 in current deferred costs and $36,935 in non-current deferred costs. In the previous year, December 31, 2023, these figures were approximately $4,065 and $45,350, respectively. For the periods ending December 31, 2024 and 2023, Bft recognized approximately $10,904 and $221 in franchise sales commission expense, respectively. The associated expense is classified within costs of franchise revenue in the consolidated statements of operations.