What are the primary sources of deferred revenue for Gokhale Method?
Gokhale_Method Franchise · 2024 FDDAnswer from 2024 FDD Document
invoice for the net royalty.
Our franchise agreements generally provide for an initial non-refundable franchise fee $4,000 per franchise for five-years term. We classify this as deferred revenue in our balance sheet and recognized over the franchise term.
The agreement also requires franchisees to pay continuing education fees including annual meeting fees, online university membership fees and teacher teleseminar fees.
Source: Item 22 — CONTRACTS (FDD page 34)
What This Means (2024 FDD)
According to the 2024 Gokhale Method Franchise Disclosure Document, the primary sources of deferred revenue are initial franchise fees and renewal fees. These fees are collected from franchisees for new franchise openings or the renewal of existing franchise terms. Gokhale Method recognizes this revenue over the duration of the franchise term.
For a prospective Gokhale Method franchisee, this means that the initial franchise fee, a $4,000 non-refundable payment for a five-year term, is not immediately recognized as revenue by the franchisor. Instead, it is recorded as deferred revenue and recognized gradually over the five-year franchise term. This accounting practice aligns the revenue recognition with the period during which the franchisee is operating and benefiting from the franchise.
This approach is common in franchising, as it reflects the ongoing support and brand usage provided by the franchisor throughout the franchise term. It also provides a more accurate picture of the franchisor's financial performance over time, as the revenue is matched with the services and benefits provided to the franchisee. Franchisees should understand that while the initial fee is paid upfront, the franchisor recognizes it as revenue incrementally over the life of the franchise agreement.