For Deer Solution, over what period are franchise contract costs amortized?
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 Franchise Disclosure Document, deferred revenue, which includes initial franchise fees, is amortized over the life of the franchise agreements. The document specifies that in 2022, $300,857 of franchise fees collected were deferred over the life of the franchise agreement, which is 7 years from the effective date. Deer Solution recognized $50,143 as a current portion of contract liabilities, due within twelve months, and $250,714 as a long-term portion of contract liabilities.
For a prospective Deer Solution franchisee, this means that the initial franchise fee paid is not immediately recognized as revenue by the franchisor. Instead, it is spread out and recognized as revenue over the 7-year term of the franchise agreement. This accounting practice aligns the revenue recognition with the period during which the franchisee is operating under the franchise agreement and receiving the benefits of the Deer Solution franchise system.
The breakdown of the deferred revenue into current and long-term portions indicates how Deer Solution manages its financial obligations related to franchise agreements. The current portion represents the amount of deferred revenue that will be recognized within the next year, while the long-term portion represents the amount to be recognized over the remaining years of the franchise agreements. This information provides insight into the financial structure and revenue recognition practices of Deer Solution, which can be useful for potential franchisees in assessing the financial stability and practices of the franchisor.