What was the deferred revenue for Gokhale Method in 2022?
Gokhale_Method Franchise · 2024 FDDAnswer from 2024 FDD Document
| 2022 | |
|---|---|
| ASSETS | |
| CURRENT ASSETS | |
| Cash and cash equivalents Accounts receivable, net | $ 120,141 3,958 |
| TOTAL ASSETS | $ 124,099 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | |
| CURRENT LIABILITIES | |
| Accounts payable and other current liabilities Deferred revenue | $ 6,667 8,086 |
Source: Item 22 — CONTRACTS (FDD page 34)
What This Means (2024 FDD)
According to Gokhale Method's 2024 Franchise Disclosure Document, the deferred revenue as of December 31, 2022, was $8,086. Deferred revenue primarily consists of initial franchise fees and renewal fees received from franchisees for new franchise openings or new franchise terms. These fees are recognized over the franchise term, meaning Gokhale Method recognizes the revenue gradually as the franchise agreement progresses.
For a prospective Gokhale Method franchisee, this means that the initial franchise fee paid is not immediately recognized as revenue by the franchisor. Instead, it is recorded as deferred revenue and recognized over the term of the franchise agreement. This accounting practice aligns with the principle of recognizing revenue when it is earned, which in this case, is over the duration of the franchise agreement.
This deferred revenue approach is common in franchising, as it accurately reflects the ongoing obligations and services Gokhale Method provides to its franchisees throughout the franchise term. It also provides a more transparent view of the franchisor's financial performance, as the revenue is matched to the services provided over time. Franchisees should understand this accounting treatment, as it impacts how the franchisor's financial statements are presented and interpreted.