According to the Deer Solution FDD, when is revenue recognized by the company?
Deer_Solution Franchise · 2025 FDDAnswer from 2025 FDD Document
57 as a current portion of the deferred expenses as it will be due within the next twelve months, $339,286 as a long-term portion of deferred expenses, and $67,857 recognized as commission expenses for the year ended 31, December 2022.
Deferred revenue consists of the remaining initial franchise fees to be amortized over the life of the franchise agreements. Deferred revenue is a result of the collection of the initial franchise fee at the time of the signing of the franchise agreement and will fluctuate each year based on the number of franchise agreements signed. In 2022, $300,857 of franchise fees collected were deferred over the life of the franchise
Source: Item 23 — RECEIPTS (FDD pages 55–246)
What This Means (2025 FDD)
According to the 2025 Deer Solution FDD, the company defers revenue consisting of the remaining initial franchise fees, which are amortized over the life of the franchise agreement. This deferred revenue arises from collecting the initial franchise fee upon signing the franchise agreement. The amount of deferred revenue fluctuates annually based on the number of franchise agreements signed.
In 2022, Deer Solution deferred $300,857 of franchise fees, which are to be recognized over the 7-year term of the franchise agreement. Of this amount, $50,143 was classified as a current portion of contract liabilities, indicating it would be recognized within the next twelve months. The remaining $250,714 was classified as a long-term portion of contract liabilities.
For a prospective Deer Solution franchisee, this means that the initial franchise fee they pay is not immediately recognized as revenue by the franchisor. Instead, it is recognized gradually over the term of the franchise agreement. This accounting practice provides a more accurate representation of the franchisor's financial performance by matching the revenue with the services and support provided to the franchisee over time. The franchisee should understand that the franchisor's reported revenue in any given year will reflect only a portion of the total franchise fees collected, with the remainder being recognized in future periods.