What was the amount of deferred franchise fees for Golden Krust Caribbean Restaurant in 2023?
Golden_Krust_Caribbean_Restaurant Franchise · 2024 FDDAnswer from 2024 FDD Document
| $ 3,557,643 |
GOLDEN KRUST FRANCHISING, INC. CONSOLIDATED BALANCE SHEETS (CONTINUED) DECEMBER 31, 2023 AND 2022
| 2023 | 2022 | |
|---|---|---|
| LIABILITIES AND SHAREHOLDERS' DEFICIT | ||
| CURRENT LIABILITIES | ||
| Accounts Payable | $ 635,580 | $ 880,096 |
| Current Lease Liability - Operating | 79,464 | 113,319 |
| Accrued Expenses | 430,622 | 450,358 |
| Note Payable - Related Party, Current Portion | 538,544 | - |
| Other Current Liabilities | 9,328 | 22,582 |
| Deferred Franchise Fees, Current Portion | 124,000 | 99,675 |
| Total Current Liabilities | 1,817,538 | 1,566,030 |
| LONG-TERM LIABILITIES | ||
| Long-Term Lease Liability - Operating, Less Current Maturities | 356,336 | 510,113 |
| Deferred Franchise Fees, Less Current Portion | 796,513 | 857,346 |
| Amount Owed to Related Parties | 126,770 | 5,725,747 |
| Note Payable - Related Party, Net of Current Portion | 4,558,007 | - |
| Total Long-Term Liabilities | 5,837,626 | 7,093,206 |
| COMMITMENTS AND CONTINGENCIES | ||
| SHAREHOLDERS' DEFICIT | ||
| Common Stock | 170,100 | 170,100 |
| Accumulated Deficit | (5,189,544) |
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 35)
What This Means (2024 FDD)
According to Golden Krust Caribbean Restaurant's 2024 Franchise Disclosure Document, the company had deferred franchise fees, which are divided into current and long-term portions. The current portion of deferred franchise fees for 2023 was $124,000, while the long-term portion was $796,513. These figures represent franchise fees that Golden Krust Caribbean Restaurant has collected but not yet recognized as revenue, as of December 31, 2023.
For a prospective franchisee, deferred franchise fees indicate that Golden Krust Caribbean Restaurant recognizes initial franchise fees over a period of time rather than immediately upon receipt. The current portion represents the amount expected to be recognized as revenue within the next year, while the long-term portion is for periods beyond one year. This accounting practice is common in franchising, as it aligns revenue recognition with the ongoing services and support provided to franchisees.
The total deferred franchise fees, combining both current and long-term portions, amounted to $920,513 as of December 31, 2023. This substantial balance suggests that Golden Krust Caribbean Restaurant has a significant pipeline of future revenue stemming from franchise fees already collected. Reviewing these deferred amounts in the context of new franchise sales trends can provide insights into the company's growth and financial stability.
It is important for potential franchisees to understand how franchise fees are accounted for, as this can impact the franchisor's reported financial performance. While deferred revenue is a common accounting practice, significant changes in these balances could signal shifts in franchise sales or revenue recognition policies, warranting further investigation.