Are there any notes to the financial statements for Goldfish Swim School included in the FDD?
Goldfish_Swim_School Franchise · 2025 FDDAnswer from 2025 FDD Document
, the determination of whether these legal entities under common control are consolidated is based on whether the Company controls the legal entities based on its direct voting rights in those entities.
Principles of Consolidation
The consolidated financial statements include the accounts of Goldfish Swim School Franchising, LLC and its wholly owned subsidiary, Goldfish Swim School Franchise Marketing, LLC. All significant intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Cash Equivalents
The Company considers all investments with an original maturity of three months or less when purchased to be cash equivalents.
Restricted Cash
The Company has restricted cash equal to the amount of unspent advertising funds on deposit. At December 31, 2024, 2023, and 2022, $228,445, $394,607, and $260,904, respectively, of cash is restricted for this purpose.
Notes to Consolidated Financial Statements
December 31, 2024, 2023, and 2022
Note 2 - Significant Accounting Policies (Continued)
Revenue Recognition
The Company earns revenue from its franchised schools, which includes royalties, franchise fees, brand fund fees, and technology fees. The Company sells individual franchisees the right to operate a school within a defined territory using the franchise name. The initial term of franchise agreements is typically 15 years, with an option to renew or transfer the franchise agreement to a new or existing franchisee.
The Company has obligations to provide franchisees with the franchise rights to operate a school, training, and site selection, as well as technology and advertising for which fees are charged. The Company has concluded that management training and site selection are separate performance obligations due to the nature of these services being nonbrand specific and capable of being used by the franchisee in other businesses. The remaining items represent a single performance obligation. Therefore, initial franchise fees for each agreement are allocated to the management training, site selection, and franchise right for each individual franchise. The management training and site selection revenue is recognized at the time the obligations have been satisfied. The franchise right revenue is recognized over the term of the respective franchise agreement beginning on the date the school is opened. Income for royalties, technology fees, and advertising fees is recognized over the term of the respective franchise agreement as the underlying sales occur.
Payment Terms
The Company's franchise agreements require the payment of various fixed and variable fees. Initial franchise fees are due and typically paid when a franchise agreement is executed and are nonrefundable. These fees are collected prior to the satisfaction of the Company's performance obligations, resulting in the Company recognizing deferred revenue contract liabilities. Initial franchise fees are also received pursuant to area development agreements, which grant the right to develop franchised swim schools in future periods in specific geographic areas.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 76)
What This Means (2025 FDD)
According to the 2025 Goldfish Swim School Franchise Disclosure Document, the financial statements include notes. These notes provide additional information and clarification on various aspects of the company's financial performance and position.
Specifically, the notes cover areas such as the nature of the business, detailing Goldfish Swim School's engagement in franchising and support of franchisees, and the significant accounting policies used in preparing the financial statements. The accounting policies discussed include the basis of accounting, principles of consolidation, use of estimates, cash equivalents, restricted cash, and revenue recognition. These notes are crucial for understanding how Goldfish Swim School's financial figures are derived and should be carefully reviewed by potential franchisees.
For example, the notes explain that Goldfish Swim School recognizes revenue from royalties, franchise fees, brand fund fees, and technology fees collected from its franchised schools. The notes also clarify that the company considers investments with an original maturity of three months or less to be cash equivalents. Furthermore, the notes specify that cash is restricted in an amount equal to the unspent advertising funds on deposit. As of December 31, 2024, 2023, and 2022, these restricted cash amounts were $228,445, $394,607, and $260,904, respectively. These details provide insight into the revenue streams and asset management practices of Goldfish Swim School, which are important for prospective franchisees to consider.
The notes also include an independent auditor's report from Plante & Moran, PLLC, which expresses an opinion on the fairness of the consolidated financial statements. This report indicates that the financial statements present fairly the financial position, results of operations, and cash flows of Goldfish Swim School in accordance with accounting principles generally accepted in the United States of America. The auditor's report provides an additional level of assurance regarding the reliability of the financial information presented.