How does Buona classify deposits on training fees on its balance sheet, and when is the revenue recognized?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchise deferred revenue results from initial and successor franchise fees and ADA fees paid by franchisees, as well as transfer fees, which are generally recognized on a straight-line basis over the term of the underlying franchise agreement. Deposits on training fees are classified as current on the balance sheet and revenue is recognized during the period of training.
Source: Item 22 — CONTRACTS (FDD page 78)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, deposits on training fees are classified as current assets on the balance sheet. This means Buona considers these deposits as assets that will be converted to cash or used up within one year or the normal operating cycle of the business, whichever is longer. For a prospective franchisee, this indicates that Buona accounts for these training fee deposits in a way that reflects their short-term nature.
Buona recognizes the revenue from these training fee deposits during the period in which the training is conducted. This aligns with standard accounting practices, where revenue is recognized when the service has been performed or the goods have been delivered. Therefore, Buona does not recognize the training fee revenue upfront when the deposit is received but rather over the course of the training program.
For a potential Buona franchisee, this accounting treatment means that the training fees you pay will not be immediately recognized as revenue by Buona. Instead, it will be recognized as the training services are provided to you. This is a common practice that ensures revenue is matched with the delivery of services, providing a more accurate picture of Buona's financial performance.