What was the amount of initial franchise fees collected by Kitchen Solvers in 2023?
Kitchen_Solvers Franchise · 2025 FDDAnswer from 2025 FDD Document
t Auditor's Report
Note 4 Contract Assets and Liabilities (Continued)
The following table provides information about significant changes in contract liabilities and assets for the years ended December 31:
| 2024 | 2023 | 2022 | ||||
|---|---|---|---|---|---|---|
| Contract liabilities - Net of contract assets, | ||||||
| beginning | $ 582,519 | $ | 518,363 | $ | 437,293 | |
| Initial franchise fee revenue recognized | (259,581) | (232,748) | (193,048) | |||
| Contract costs recognized | 138,404 | 120,154 | 105,366 | |||
| New contract costs paid | (200,000) | (228,250) | (292,000) | |||
| Collections of initial franchise fees | 488,991 |
Source: Item 21 — Financial Statements (FDD pages 48–49)
What This Means (2025 FDD)
According to Kitchen Solvers' 2025 Franchise Disclosure Document, the company collected $405,000 in initial franchise fees in 2023. This figure represents the total amount of initial fees Kitchen Solvers received from new franchisees during that year. It's important to note that while Kitchen Solvers collects this upfront fee, they do not recognize the entire amount as revenue immediately.
Instead, Kitchen Solvers recognizes the initial franchise fee revenue over the life of the franchise agreement, which is generally 10 years. This accounting practice, as detailed in the notes, aligns with the principle of recognizing revenue when the company has fulfilled its obligations to the franchisee. The initial franchise fee is considered a contract liability and is amortized over the 10-year period.
For a prospective Kitchen Solvers franchisee, this information provides insight into the financial health and revenue streams of the franchisor. Understanding how initial franchise fees are collected and recognized can help franchisees assess the long-term stability and growth potential of Kitchen Solvers. Additionally, it's useful to compare the collected fees with other revenue sources, such as royalty, technology, and brand fund fees, to gain a comprehensive view of the franchisor's financial performance.