Over what period does Aerus recognize deferred revenue from franchise agreements?

According to Aerus's 2025 Franchise Disclosure Document, revenue from the sales of individual franchises and franchise renewals is initially recorded as deferred revenue. This deferred revenue is then recognized as actual revenue over the contractual term of the franchise agreements, which is a period of 3 years.

This means that Aerus does not immediately recognize the full franchise fee as revenue when it's received. Instead, it spreads the recognition of this revenue over the entire length of the franchise agreement. This accounting practice provides a more accurate reflection of when Aerus earns the revenue, aligning it with the ongoing services and support provided to the franchisee throughout the franchise term.

For a prospective Aerus franchisee, this information is primarily relevant for understanding Aerus's financial reporting practices. It assures that the initial franchise fee contributes to Aerus's revenue stream gradually over the term of the agreement, aligning Aerus's financial interests with the franchisee's long-term success. This can be a sign of a stable and well-managed franchise system.