What was the balance of deferred non-refundable franchise fees for Hyper Kidz at the beginning of 2023?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
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, | ||||||
|---|---|---|---|---|---|---|
| 2023 | 2022 | |||||
| Deferred Non-refundable Franchise Fees: | ||||||
| Balance Beginning of year | $ | 63,858 | $ | 28,637 | ||
| Deferral of non-refundable franchise fees | 128,000 | 39,500 | ||||
| Recognition of non-ref |
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 52)
What This Means (2024 FDD)
According to Hyper Kidz's 2024 Franchise Disclosure Document, the balance of deferred non-refundable franchise fees at the beginning of 2023 was $63,858. This figure represents the amount of franchise fees that Hyper Kidz had collected but not yet recognized as revenue as of January 1, 2023. These fees are typically deferred and recognized over time as Hyper Kidz fulfills its obligations under the franchise agreement.
For a prospective Hyper Kidz franchisee, this deferred revenue balance indicates the financial health and accounting practices of the franchisor. It reflects the initial franchise fees received from franchisees that are yet to be earned. The deferral and subsequent recognition of these fees align with standard accounting principles, where revenue is recognized when earned rather than when cash is received.
Understanding the deferred revenue balance can help a potential franchisee assess the franchisor's revenue recognition policies and financial stability. It's important to note that these are non-refundable fees, meaning franchisees will not receive this money back under any circumstances. Reviewing these figures in conjunction with other financial statement items provides a more complete picture of Hyper Kidz's financial performance.