What was the total amount of franchise and ADA fees collected by Stretch Zone in 2023?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
on expense and for the years ended December 31, 2024 and 2023 was $25,475 and $6,167, respectively.
Contract liabilities consist of deferred revenue resulting from initial and successor franchise fees. The contract liabilities balance as of January 1, 2023 was $12,834,155. ADA fees paid by franchisees, and transfer fees, which are generally recognized on a straight-line basis over the term of the underlying franchise agreement, as well as grand opening fees which were recognized when earned. The Company classified these contract liabilities as deferred revenu
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 tracks franchise and ADA fees as part of its contract liabilities, which are classified as deferred revenue. As of January 1, 2023, the total contract liabilities balance, which includes initial and successor franchise fees, ADA fees paid by franchisees, and transfer fees, was $12,834,155. These fees are generally recognized on a straight-line basis over the term of the franchise agreement, while grand opening fees are recognized when earned.
This means that Stretch Zone does not recognize the entire franchise fee as revenue immediately upon collection. Instead, it defers the revenue recognition over the life of the franchise agreement. This accounting practice is common in the franchise industry, as it aligns revenue recognition with the ongoing services and support that the franchisor provides to the franchisee.
While the FDD states the total balance of contract liabilities as of January 1, 2023, it does not specify the exact amount of franchise and ADA fees collected during the 2023 calendar year. A prospective franchisee should ask Stretch Zone for the specific amount of franchise and ADA fees collected in 2023 to gain a clearer understanding of the company's revenue streams from these sources.