What causes deferred revenue to fluctuate each year for Deck Medic?

According to Deck Medic's 2024 Franchise Disclosure Document, deferred revenue fluctuates each year based on the number of franchise agreements signed. Deferred revenue consists of the remaining initial franchise fees that are to be amortized over the life of the franchise agreements.

When Deck Medic collects the initial franchise fee at the time of signing a new franchise agreement, the revenue is initially recorded as deferred. This is because Deck Medic has not yet earned the revenue. Over the term of the franchise agreement, Deck Medic recognizes a portion of the deferred revenue each year as it provides ongoing support and services to the franchisee.

Therefore, in practical terms, if Deck Medic signs more franchise agreements in one year compared to the previous year, the deferred revenue will increase. Conversely, if fewer agreements are signed, the deferred revenue will decrease. This fluctuation reflects the timing of initial fee collections and how they are recognized as earned revenue over the life of the franchise agreements.