What is represented by the 'deferred revenue on franchise sales' contract liability on the consolidated balance sheets for Bumble Roofing?
Bumble_Roofing Franchise · 2025 FDDAnswer from 2025 FDD Document
provided exceeds the standalone value individual services performed by the Franchisors. Included in the accompanying consolidated balance sheets is a contract liability, "deferred revenue on franchise sales," which represents initial services that have not yet been completed for franchisees. Upon completion of these initial services, the franchise fees are recognized as revenue in the accompanying statements of income. In certain circumstances, the Franchisors finance the sale of Franchise Agreements.
Ancillary Revenues
Ancillary revenues consist of various fees and charges that supplement the Company's primary sources of income. These fees include training fees, drafting services, technology fees, rebate payments, and other miscellaneous fees and charges. The Company receives rebate payments from certain suppliers based on the aggregate purchases made by certain regional developers and unit franchisees from these suppliers.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 53)
What This Means (2025 FDD)
According to Bumble Roofing's 2025 Franchise Disclosure Document, the 'deferred revenue on franchise sales' listed as a contract liability on the consolidated balance sheets represents initial services owed to franchisees that have not yet been completed. These initial services, provided after the Franchise Agreement is executed, include advertising material, manuals, website development, training, and on-site assistance. The franchisor recognizes the franchise fees as revenue only upon completion of these initial services.
This deferred revenue indicates that Bumble Roofing has collected franchise fees for which it still has obligations to fulfill. For a prospective franchisee, this means that a portion of the initial franchise fee covers specific services and support that Bumble Roofing is contractually obligated to provide. The FDD states that the value of these initial services exceeds the standalone value of the individual services performed by the Franchisors.
The consolidated balance sheets include a contract liability for deferred revenue on franchise sales of $(1,394,476). This deferred revenue is recognized as revenue in the accompanying statements of income once Bumble Roofing completes its initial service obligations to the franchisees.
In certain circumstances, Bumble Roofing may finance the sale of Franchise Agreements. This deferred revenue accounting ensures that Bumble Roofing does not recognize revenue until it has provided the agreed-upon initial services, aligning revenue recognition with the delivery of services to the franchisee.