How much revenue was classified as Area Development Agreement fees on Itan's statements of earnings for the year ended December 31, 2024?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
| 2023 | ||
|---|---|---|
| Franchise locations, beginning of year | 29 | 31 |
| Opened franchise locations | ( | - |
| Closed franchise locations | 1 | 2 |
| Franchise locations, end of year | 28 | 29 |
During 2024 and 2023, the number of franchise locations owned by a related party were zero and five, respectively (see note 5).
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NOTE 7 ACCRUED LIABILITIES
Accrued Liabilities consist of the following:
| Accrued payroll | $ | 14,518 | $ 4,743 | |--------------
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, for the year ended December 31, 2024, $11,500 was classified as revenue from Area Development Agreement fees on Itan's statements of earnings. This revenue recognition is related to a ten-year, non-refundable Area Development Agreement (ADA) signed in December 2023.
The ADA pertains to the opening of ten to twenty Itan salons over a ten-year period. The total amount of the agreement is recognized on a straight-line basis over the term of the ADA. As of December 31, 2024, the remaining contract liabilities associated with this agreement amounted to $103,500.
This means that Itan recognizes a portion of the total ADA fee as revenue each year, rather than recognizing the entire fee upfront. For a prospective franchisee, this indicates that Itan is securing long-term commitments from area developers and spreading the revenue recognition over the life of the agreement. The contract liabilities represent the deferred revenue that Itan will recognize in future periods as the area developer opens new salons.