How does Deer Solution recognize revenue from pre-opening services?
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 Deer Solution's 2025 Franchise Disclosure Document, the company defers revenue from initial franchise fees and amortizes it over the life of the franchise agreement. Specifically, the document states that deferred revenue results from collecting the initial franchise fee when the franchise agreement is signed. This deferred revenue fluctuates annually based on the number of franchise agreements signed.
In 2022, Deer Solution deferred $300,857 of franchise fees, which will be amortized over the 7-year term of the franchise agreements. Of this amount, $50,143 is recognized as the current portion of contract liabilities, representing the amount due within the next twelve months. The remaining $250,714 is classified as a long-term portion of contract liabilities.
For a prospective Deer Solution franchisee, this means that the initial franchise fee paid upon signing the agreement is not immediately recognized as revenue by the franchisor. Instead, Deer Solution recognizes this revenue gradually over the 7-year franchise term. This accounting practice provides a more accurate representation of the franchisor's financial performance by matching the revenue with the ongoing services and support provided to the franchisee throughout the franchise term.