What are the steps Deer Solution takes to recognize revenue?
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 uses deferred revenue recognition for initial franchise fees. When a new franchise agreement is signed, Deer Solution collects the initial franchise fee. However, instead of recognizing the entire fee as revenue immediately, it is deferred. This means the revenue is recognized gradually over the term of the franchise agreement, which is seven years.
In 2022, Deer Solution collected $300,857 in franchise fees, which were then deferred. Of this amount, $50,143 was recognized as the current portion of contract liabilities, representing the amount due within the next twelve months. The remaining $250,714 was classified as a long-term portion of contract liabilities, to be recognized over the remaining years of the franchise agreement.
This approach to revenue recognition aligns with standard accounting practices, where revenue is recognized as services are provided or obligations are fulfilled over time. For a prospective franchisee, this means that Deer Solution's financial statements will reflect a consistent revenue stream from franchise fees over the life of the agreements, rather than a large, one-time spike in the year the agreement is signed. This can provide a more stable and predictable financial picture of the company.