What were the total contract liabilities for Chicken Guy as of December 29, 2024?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
ended December 31, 2023, and December 25, 2022, no commission expense was recognized as no units had been opened under the related development and franchise agreements during those years.
Contract Liabilities
Contract liabilities consist of deferred development and franchise fees. The Company recognizes revenue from franchisees as the related performance obligations are satisfied. A contract liability is recorded when the Company receives a payment in advance of the satisfaction of its performance obligations. Contract liabilities that are expected to be recognized as revenues during the succeeding twelve-month period are presented as contract liabilities, current portion, and the remaining portion is presented as contract liabilities, long-term portion on the accompanying balance sheets. Total contract liabilities at each of
December 29, 2024, December 31, 2023, and December 25, 2022, were $1,177,499, $1,611,833, and $1,578,500, respectively. Total contract liabilities as of the beginning of the year ended December 25, 2022, were $397,000.
Customer Deposits
Customer deposits represent payments received in advance from potential future franchisees that are subject to cancellation and refund provisions.
Income Taxes
The Company was formed as a limited liability company and is treated as a pass-through entity for federal income tax purposes. The Company's member includes the Company's income or loss in its individual income tax return. Accordingly, no provisions or liabilities for federal and state income taxes have been included in the accompanying fin
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 50)
What This Means (2025 FDD)
According to Chicken Guy's 2025 Franchise Disclosure Document, the company's total contract liabilities as of December 29, 2024, were $1,177,499. The FDD also provides the total contract liabilities for the previous two years. As of December 31, 2023, the total was $1,611,833, and as of December 25, 2022, it was $1,578,500. The total contract liabilities at the beginning of the year ended December 25, 2022, were $397,000.
Contract liabilities, in this context, refer to deferred development and franchise fees. Chicken Guy recognizes revenue from franchisees as they fulfill their obligations. When Chicken Guy receives payments before fulfilling these obligations, they record it as a contract liability. The portion of these liabilities expected to be recognized as revenue within the next 12 months is classified as a current liability, while the remainder is considered a long-term liability.
For a prospective franchisee, this information is useful for understanding how Chicken Guy manages its finances and obligations. A significant amount in contract liabilities could indicate substantial future obligations to franchisees, which might affect the franchisor's financial stability and ability to support its franchisees. Reviewing these figures over several years can reveal trends in how Chicken Guy manages its deferred revenue and obligations.
It is important to note that these figures are based on accounting principles and estimates, as mentioned in the FDD. Actual results may vary. A potential franchisee should consult with a financial advisor to fully understand the implications of these financial statements.