What was the approximate deferred revenue for Stretch Zone as of December 31, 2022?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
fied at a point in time, and $2,015,436 and $1,522,978 of revenues represent performance obligations that were satisfied over time.
[10] 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. Deferred revenue represents cash received from franchisees for ADAs and franchise fees for which revenue recognition criteria
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, the deferred revenue as of December 31, 2022, was approximately $12,800,000. This deferred revenue primarily comes from initial and successor franchise fees, ADA (Area Development Agreement) fees, transfer fees, and initial media fund fees paid by franchisees. These fees are generally recognized as revenue on a straight-line basis over the term of the franchise agreement.
Deferred revenue represents cash that Stretch Zone has already received from franchisees but has not yet recognized as earned revenue because the revenue recognition criteria have not been fully met. This typically occurs when Stretch Zone has an ongoing obligation to provide services or fulfill other requirements over a period of time, such as the length of the franchise agreement. The deferred revenue is recognized as the services are rendered or the obligations are fulfilled.
For a prospective Stretch Zone franchisee, this means that a portion of the initial fees they pay to Stretch Zone is not immediately recognized as revenue by the franchisor. Instead, it is recognized gradually over the term of the franchise agreement. This accounting practice aligns the revenue recognition with the actual delivery of services and support provided by Stretch Zone to its franchisees over the life of the agreement. Understanding the deferred revenue balance can provide insights into the financial stability and future revenue streams of Stretch Zone.