What statements related to income are included in the Degree Wellness financial statements?
Degree_Wellness Franchise · 2025 FDDAnswer from 2025 FDD Document
Attached to this Franchise Disclosure Document as Exhibit G are:
Degree Wellness Franchise, LLC's audited balance sheets as of December 31, 2024, and the related statements of income, retained earnings, and of cash flow for the years then ended. We have not been in business for three years or more and cannot include all the financial statements required by the Rule
Our fiscal year end is December 31. The Franchisor has not been in business for three years or more, and cannot include all financial statements required by the FTC Franchise Rule.
We have audited the financial statements of Degree Wellness Franchise, LLC, which comprise the balance sheet as of December 31, 2024, and the related statements of earnings and members' equity (deficit) and cash flows for the period April 1, 2024 through December 31, 2024, and the related notes to the financial statements.
The Company earns revenue through franchise fees, training fees, and ongoing royalty and advertisement fees under the Company's franchise agreements.
Initial franchise fee revenue is recognized over the life of the franchise agreements, which is generally 10 years, as the fee is for the right to use the Company's intellectual property over the term of the agreement. Initial franchise fee payments received by the Company that have not yet been recognized as revenue are recorded as deferred franchise revenue. Expenses incurred related to the franchise agreements, consisting mostly of broker fees, are deferred and recognized as expense over the life of the associated franchise agreement. See Note 3 for further disclosures related to deferred franchise revenue and deferred franchise fees. During the period April 1, 2024 through December 31, 2024, the Company's revenue was comprised entirely of franchise fees recognized "over time".
Source: Item 21 — Financial Statements (FDD page 66)
What This Means (2025 FDD)
According to Degree Wellness's 2025 Franchise Disclosure Document, the company's financial statements include statements of income. The audited financial statements include the balance sheets as of December 31, 2024, and related statements of earnings and members' equity (deficit) and cash flows for the period from April 1, 2024, through December 31, 2024. These statements offer insights into the financial performance and cash flow activities of Degree Wellness during this period.
The auditor's report expresses an opinion on the fairness of the presentation of these financial statements, in accordance with accounting principles generally accepted in the United States of America. Management is responsible for the preparation and presentation of the financial statements, including the design, implementation, and maintenance of internal controls. The auditor's responsibility is to express an opinion on these financial statements based on their audit.
Furthermore, Degree Wellness recognizes revenue through franchise fees, training fees, and ongoing royalty and advertisement fees under the Company's franchise agreements. Initial franchise fee revenue is recognized over the life of the franchise agreements, typically 10 years. During the period from April 1, 2024, through December 31, 2024, the company's revenue was entirely comprised of franchise fees recognized "over time". This indicates how Degree Wellness generates income and manages its revenue recognition process, which is crucial for understanding its financial health and sustainability.