What was the amount of recognition of non-refundable franchise fees for Hyper Kidz in 2022?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
ncial position or results of operations of the Company.
NOTE 2 – CONTRACT BALANCES
The Company recorded a liability for unearned revenue associated with the performance obligation of the Company's franchise agreements. The account balances and activity are as follows:
| December 31, | ||||
|---|---|---|---|---|
| 2022 | 2021 | |||
| Deferred Non-refunda |
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 52)
What This Means (2024 FDD)
According to Hyper Kidz's 2024 Franchise Disclosure Document, the recognition of non-refundable franchise fees in 2022 was an expense of $4,279. This figure appears in the financial statements under the category 'Recognition of non-refundable franchise fees.'
This recognition of non-refundable franchise fees represents the amount of initial franchise fees that Hyper Kidz recognized as revenue during that year. The initial franchise fee is typically paid upfront by the franchisee, but Hyper Kidz defers recognizing the full amount as revenue until they have fulfilled their obligations under the franchise agreement. As Hyper Kidz satisfies these obligations, they recognize a portion of the deferred revenue.
For a prospective Hyper Kidz franchisee, this information provides insight into how the company recognizes revenue from franchise fees over time. It also shows the consistency in revenue recognition, as similar amounts were recognized in 2021 ($3,950) and 2023 ($14,063). Understanding these accounting practices can help a franchisee better assess the financial health and stability of the Hyper Kidz franchise system.