How much deferred revenue did Stretch Zone report in 2023?
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 company had approximately $16,500,000 in deferred revenue as of December 31, 2023. This deferred revenue stems from initial and successor franchise fees, ADA (presumably, Americans with Disabilities Act) fees paid by franchisees, transfer fees, and initial media fund fees. Stretch Zone typically recognizes this revenue on a straight-line basis over the term of the franchise agreement.
Deferred revenue signifies cash that Stretch Zone has already received but hasn't yet recognized as earned revenue on its income statement because the services or products associated with those fees haven't been fully provided. For example, when a new franchisee pays their initial franchise fee, Stretch Zone doesn't immediately count all of that as revenue. Instead, it's recognized gradually over the life of the franchise agreement.
For a prospective Stretch Zone franchisee, this deferred revenue figure indicates the financial health and stability of the franchise system. A substantial deferred revenue balance suggests that Stretch Zone is consistently selling franchises and collecting fees upfront. This can be a positive sign, but it's also important to consider how Stretch Zone manages and recognizes this revenue over time, as it impacts their ongoing financial performance. Understanding the terms of the franchise agreement and how fees are recognized is crucial for franchisees to assess the true cost and revenue potential of their investment.