What was the total amount of new deferrals due to cash received by Carls in 2024?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
. If we sublease a restaurant to a franchisee on terms that result in a probable loss, then we will establish a lease subsidy allowance and record a loss at the time we enter into the lease arrangement. As further described above, the amount of the estimated liability for the lease subsidy is the present value of our estimated future payments, net of the present value of the expected sublease income.
Contract Liabilities - Deferred Franchise Fees
The following table provides information about contract liabilities, specifically deferred franchise fees, received from contracts with customers:
| 2024 | 2023 | |
|---|---|---|
| Deferred franchise fees, beginning of year | $ 36,129 | $ 37,586 |
| Revenue recognized during the period | (5,084) | (6,120) |
| New deferrals due to cash received | 4,91 |
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 79–80)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, there are two slightly different values reported for 'New deferrals due to cash received' in 2024. One instance reports $4,916 and another reports $4,919. These figures represent the amount of cash Carls received during 2024 that is allocated to future franchise services or products, and is therefore recognized as deferred revenue on the balance sheet.
For a prospective franchisee, this indicates the amount of revenue Carls is holding for future obligations. It reflects the sales of franchises and related fees that haven't yet been fully earned. This is a common accounting practice in franchising, as initial franchise fees are often recognized over the term of the franchise agreement rather than immediately upon receipt.
The difference between the two reported values ($4,916 and $4,919) is minor, but it highlights the importance of carefully reviewing the entire FDD and clarifying any discrepancies with the franchisor. A potential franchisee might want to inquire about the reason for the difference and which figure is the most accurate representation of new deferrals.