What was the current portion of non-refundable deferred franchise sales for Hyper Kidz in 2022?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
it, significant audit findings, and certain internal control—related matters that we identified during the audit.
Ft. Collins, Colorado March 11, 2023
BOOMERANG FRANCHISE, LLC BALANCE SHEETS AS OF DECEMBER 31, 2022 AND 2021
| 2022 | 2021 | |||||
|---|---|---|---|---|---|---|
| ASSETS: | ||||||
| CURRENT ASSETS | ||||||
| Cash and equivalents | $ | 7,376 | $ | 20 | ||
| Accounts receivable | 18,006 | - | ||||
| TOTAL CURRENT ASSETS | 25,382 | 20 | ||||
| TOTAL ASSETS | $ | 25,382 | $ | 20 | ||
| LIABILITIES AND MEMBERS' (DEFICIT): | ||||||
| CURRENT LIABILITIES | ||||||
| Royalties collected in advance | $ | - | $ | 36,612 | ||
| Non-refundable deferred franchise sales, current portion | 7,900 | 3,950 | ||||
| Accrued expenses | 3,813 | 820 | ||||
| Notes payable, current portion | 341 | - | ||||
| TOTAL CURRENT LIABILITIES | 12,054 | 41,382 | ||||
| LONG-TERM LIABILITIES | ||||||
| Non-refundable deferred franchise sales | 55,958 | 24,687 | ||||
| Notes payable | 78,659 | 79,000 | ||||
| TOTAL LIABILITIES | 146,671 | 145,069 | ||||
| MEMBERS' (DEFICIT) | ||||||
| Memb |
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 52)
What This Means (2024 FDD)
According to Hyper Kidz's 2024 Franchise Disclosure Document, the current portion of non-refundable deferred franchise sales for 2022 was $7,900. This figure represents the amount of franchise fees that Hyper Kidz expects to recognize as revenue within the next year (2023). These are franchise fees that have been collected but not yet earned, as Hyper Kidz has not yet provided all of the services or fulfilled all of its obligations to warrant recognizing the revenue.
For a prospective Hyper Kidz franchisee, this deferred revenue recognition means that Hyper Kidz is accounting for franchise fees over a period of time rather than immediately upon receipt. The current portion indicates the amount they anticipate recognizing in the short term. This accounting practice is common in franchising, as the franchisor typically provides ongoing support and services to the franchisee throughout the term of the franchise agreement.
The non-current portion of non-refundable deferred franchise sales, which is not specified here, would represent the amount expected to be recognized as revenue beyond the next year. Reviewing both the current and non-current portions provides a more complete picture of Hyper Kidz's deferred revenue related to franchise fees. This information is useful for understanding the financial obligations and revenue recognition practices of Hyper Kidz.