What was the approximate amount of deferred revenue for Stretch Zone as of December 31, 2022?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
venues represent performance obligations that were satisfied over time.
[12] Deferred revenue:
Deferred revenue results from initial and successor franchise fees and ADA fees paid by franchisees, as well as transfer fees and the initial media fund fee, which are generally recognized on a straight-line basis over the term of the underlying franchise agreement. Grand opening fees are included in deferred revenue and recognized upon the opening of the franchise location. Deferred revenue represents cash received from franchisees for ADAs, grand opening fees and franchise fees for which revenue recognition criteria have not yet been met. As of December 31, 2024, 2023 and 2022
Source: Item 3 — Franchisee/Debtor's Warranties. (FDD pages 263–364)
What This Means (2025 FDD)
According to Stretch Zone's 2025 Franchise Disclosure Document, as of December 31, 2022, the company had approximately $12,800,000 in deferred revenue. This deferred revenue stems from initial and successor franchise fees, ADA (Americans with Disabilities Act) fees paid by franchisees, transfer fees, and the initial media fund fee. These fees are generally recognized on a straight-line basis over the term of the franchise agreement. Grand opening fees are also included in deferred revenue and are recognized when a franchise location opens.
For a prospective Stretch Zone franchisee, this means that the initial fees paid to the company are not immediately recognized as revenue by Stretch Zone. Instead, they are recognized over time as Stretch Zone fulfills its obligations under the franchise agreement. This accounting practice is standard in the franchise industry, as it aligns revenue recognition with the delivery of services and support to franchisees over the life of the agreement.
The deferred revenue balance reflects the cash Stretch Zone has received for which it has not yet provided all the services or fulfilled all the conditions required to recognize the revenue. Monitoring the deferred revenue can provide insights into the company's future revenue streams, as it represents a commitment to provide future services to franchisees. This figure can be useful for potential franchisees to understand the financial health and stability of Stretch Zone.