When does Deer Solution recognize revenue related to performance obligations?
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 franchisor defers revenue consisting of initial franchise fees, which are then amortized over the life of the franchise agreement. Specifically, in 2022, $300,857 of franchise fees collected were deferred over the 7-year term of the agreement.
Deer Solution recognizes a portion of these deferred fees as current contract liabilities, representing the amount due within the next twelve months. In 2022, this current portion was $50,143. The remaining amount, $250,714, is classified as a long-term portion of contract liabilities.
For a prospective franchisee, this means that Deer Solution does not immediately recognize the entire initial franchise fee as revenue. Instead, it spreads the recognition over the 7-year franchise term. This accounting practice can provide a more accurate picture of the company's financial performance over time, as it aligns revenue recognition with the ongoing obligations and services provided to franchisees.