What was the noncurrent deferred revenue for Precision Door Service at the end of 2024?
Precision_Door_Service Franchise · 2025 FDDAnswer from 2025 FDD Document
ertising. The other deferred revenues not related to the franchise agreements are included in current deferred revenue.
The components of the change in deferred revenue are as follows:
| For the years ended December 31, | 2024 | 2023 |
|---|---|---|
| Balance at beginning of period | $ 83,807 | $ 68,226 |
| Fees received from franchise owners | 35,141 | 47,447 |
| Franchise sales revenue recognized | (33,680) | (36,783) |
| Contributed from Manager | - | 4,386 |
| Other deferred revenue recognized | 264 | 531 |
| Balance at end of period | 85,532 | 83,807 |
| Less: current portion | 14,745 | 13,631 |
| Deferred revenue, noncurrent | $ 70,787 | $ 70,176 |
Notes to Combined Financial Statements ($000's)
As of December 31, 2024, the deferred revenue expected to be recognized for each of the next five years, and in the aggregate, is as follows:
| 2025 | $ 14,745 |
|---|---|
| 2026 | 11,949 |
| 2027 | 11,701 |
| 2028 | 11,109 |
| 2029 | 9,829 |
| Thereafter | 26,199 |
$ 85,532
Direct, incremental selling expenses are reimbursed by the Company to the Manager. Such costs paid when the franchise agreement is executed are recorded as a contract asset by the Company and amortized over the life of the agreement consistent with the recognition of the deferred revenue. Contract assets are included in current and non-current prepaid selling expenses in the accompanying Combined Balance Sheets. For the year ended December 31, 2024, $24,044 of costs were incurred and expense of $14,023 was recognized.
Source: Item 21 — Financial Statements (FDD page 91)
What This Means (2025 FDD)
According to Precision Door Service's 2025 Franchise Disclosure Document, the noncurrent deferred revenue at the end of 2024 was reported in two separate instances. One instance indicates that the noncurrent deferred revenue was $70,787 at the end of 2024, while the other states that it was $74,718 at the end of 2024. These figures represent the portion of deferred revenue not expected to be recognized within the next 12 months.
Deferred revenue typically arises from initial franchise fees that Precision Door Service collects upfront but recognizes as revenue over time as it fulfills its obligations to franchisees. The noncurrent portion specifically refers to the revenue that Precision Door Service anticipates recognizing beyond the upcoming year. This liability on Precision Door Service's balance sheet reflects their obligation to provide ongoing services and support to franchisees in the future.
A prospective franchisee should take note of these figures as they provide insight into the financial obligations and revenue recognition practices of Precision Door Service. Understanding the breakdown between current and noncurrent deferred revenue can help a franchisee assess the company's financial stability and how it manages its long-term commitments to its franchisees. It is important to understand why there are two different values reported for noncurrent deferred revenue and how that may impact the financial status of the company.
It is common for franchisors to defer the recognition of initial franchise fees, recognizing them over the term of the franchise agreement. This accounting practice aligns revenue recognition with the provision of ongoing services and support, reflecting the franchisor's continuing obligations to the franchisee. The deferred revenue balance provides a snapshot of these future obligations.