What was the amount of revenue recognized during the period for Carls in 2023?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
ng Refranchising Transactions*
We record gains and losses on the sale of restaurants as the difference between the net proceeds received and net carrying values of the net assets of the restaurants sold. As discussed within the section "Goodwill and Intangible Assets" in this Note 1, we include goodwill in the carrying amount of the restaurants in determining th
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 79–80)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, the revenue recognized during the period in 2023 was $6,142 for franchise fees. This figure represents the amount of deferred franchise fees that Carls recognized as revenue during that fiscal year.
Deferred franchise fees typically arise when Carls receives upfront payments from franchisees but recognizes the revenue over the term of the franchise agreement. This accounting practice aligns the revenue recognition with the period during which Carls provides ongoing services and support to the franchisee. The initial amount of deferred franchise fees at the beginning of 2023 was $37,420. New deferrals due to cash received amounted to $4,664. The deferred franchise fees at the end of the year were $35,942.
For a prospective Carls franchisee, this information provides insight into how the franchise fees they pay are accounted for by the franchisor. It demonstrates that Carls recognizes these fees as revenue over time, which is a common practice in franchising. Understanding this accounting method can help franchisees better interpret Carls's financial statements and assess the financial health of the franchise system.