For Buff City Soap, what costs are capitalized as deferred contract acquisition costs?
Buff_City_Soap Franchise · 2025 FDDAnswer from 2025 FDD Document
| | Revenue recognized over time | | | | | Franchise and development fees | 1,844 | 2,046 | 923 | | Total revenue recognized over time | 1,844 | 2,046 | 923 | | Total revenues | $ 12,232 | $ 12,923 | $ 9,838 |
Deferred Contract Acquisition Costs - Assets
The Company capitalizes certain legal and professional costs and commissions paid related to obtaining new franchise and development agreements as these costs are incremental and recoverable costs of obtaining a contract with a customer.
For the fiscal year ended December 29, 2024, contract acquisition cost amortization of $203 was included in professional and technology services in the statement of operations. The balance of deferred contract acquisition costs is $1,204 as of December 29, 2024, consisting of the current portion of $0 included in prepaid expenses and other current assets and the long-term portion of $1,204 included in contract acquisition costs on the balance sheet.
For the fiscal year ended December 31, 2023, contract acquisition cost amortization of $320 was included in professional and technology services in the statement of operations. The balance of deferred contract acquisition costs is $1,407 as of December 31, 2023, consisting of the current portion of $0 included in prepaid expenses and other current assets and the long-term portion of $1,407 included in contract acquisition costs on the balance sheet. (in thousands)
For the fiscal year ended January 1, 2023, contract acquisition cost amortization of $0 was included in professional and
Source: Item 6 — , Securities Offering Fee, in the amount column is revised to state the following: (FDD pages 216–303)
What This Means (2025 FDD)
According to Buff City Soap's 2025 Franchise Disclosure Document, the company capitalizes certain costs related to obtaining new franchise and development agreements. These costs include legal and professional fees, as well as commissions paid. Buff City Soap considers these costs incremental and recoverable because they are directly associated with securing a contract with a customer (the franchisee).
For the fiscal year ending December 29, 2024, the amortization of these contract acquisition costs amounted to $203,000, which was included in professional and technology services expenses. As of December 29, 2024, the total balance of deferred contract acquisition costs stood at $1,204,000. This balance is categorized as a long-term asset on the balance sheet, specifically under contract acquisition costs.
In the previous fiscal year, which ended December 31, 2023, the amortization expense for contract acquisition costs was $320,000, also included in professional and technology services. The deferred contract acquisition costs balance as of December 31, 2023, was $1,407,000, again classified as a long-term asset. These figures indicate that Buff City Soap invests significantly in securing new franchise agreements, and these costs are recognized over time as the benefits are realized.