How much in non-refundable franchise fees did Hyper Kidz defer in 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 | $ |
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 52)
What This Means (2024 FDD)
According to Hyper Kidz's 2024 Franchise Disclosure Document, the company deferred $128,000 in non-refundable franchise fees during the year 2023. This deferral of fees is a notable aspect of Hyper Kidz's financial operations, as it reflects the initial franchise fees that have not yet been recognized as revenue. Instead, these fees are recorded as deferred revenue on the balance sheet.
For a prospective Hyper Kidz franchisee, understanding deferred revenue is crucial because it impacts the company's reported financial performance. The deferral and subsequent recognition of franchise fees over time is an accounting practice that aligns revenue recognition with the delivery of services or fulfillment of obligations to the franchisee. This approach provides a more accurate picture of Hyper Kidz's financial health by matching revenue with the associated costs and obligations.
The FDD also indicates that Hyper Kidz recognized $14,063 of non-refundable franchise fees in 2023. The balance of deferred non-refundable franchise fees at the end of 2023 was $177,795, compared to $63,858 at the beginning of the year. These figures provide insight into how Hyper Kidz manages its revenue recognition and financial reporting, which can be useful for potential franchisees assessing the financial stability and practices of the franchise system.