What amount of deferred revenue relates to the unsatisfied future performance obligations associated with unopened SBRs for Carvel?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
| December 29, | December 31, | |
|---|---|---|
| For the fiscal years ended: | 2024 | 2023 |
| Deferred revenue at the beginning of the period | $ 58,511 | $ 60,270 |
| Revenue recognized during the period | (11,013) | (12,258) |
| Deferrals due to cash received and other | 14,761 | 10,499 |
| Deferred revenue and Long-term deferred revenue | $ 62,259 | $ 58,511 |
The Company expects to recognize revenue in the future related to performance obligations that are partially satisfied at the end of the year:
| | December 29, |
Source: Item 23 — Receipts (FDD pages 100–353)
What This Means (2025 FDD)
According to Carvel's 2025 Franchise Disclosure Document, deferred revenue of $24,501 or $29,819 relates to the unsatisfied future performance obligations associated with unopened SBRs (Store Based Restaurants). This revenue is not included in the provided table. Carvel anticipates recognizing this revenue over the terms of the respective franchise agreements, which typically range from 10 to 20 years, once the related SBRs are opened.
This means that Carvel holds franchise fees and development fees as deferred revenue until the store opens. Once the Carvel store opens, the company starts to recognize the revenue on a straight-line basis over the life of the franchise agreement, which is usually 10 to 20 years. This accounting practice is common in franchising, as it aligns revenue recognition with the actual delivery of the franchise benefits and services over the term of the agreement.
For a prospective Carvel franchisee, this deferred revenue recognition has implications for Carvel's financial reporting. It reflects the company's obligations to provide ongoing support and brand usage rights to franchisees. The deferred revenue balance represents a future revenue stream for Carvel as they fulfill their obligations under the franchise agreements. Note that there are two different values provided for deferred revenue, $24,501 and $29,819. It is not clear why there are two different values.