How does Aira Fitness estimate the stand-alone selling price of pre-opening activities?
Aira_Fitness Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company estimates the stand-alone selling price of pre-opening activities using an adjusted market assessment approach. The Company will first allocate the initial franchise fees and the fixed consideration, under the franchise agreement to the standalone selling price of the training services that are not brand specific and the residual, if any, to the right to access the Company's intellectual property. Consideration allocated to pre-opening activities, which are not brand specific are recognized ratably as those services are rendered. Consideration allocated to pre-opening activities included under Accounting Standards Update (ASU) to ASC 606, Franchisors—'Revenue from Contracts with Customers (Subtopic 952-606): Practical Expedient' is recognized when the related services have been rendered.
The remaining franchisee fee not allocated to pre-opening activities are recorded as Unearned Revenue and will be recognized over the term of the franchise agreement.
Source: Item 23 — **RECEIPTS (FDD pages 59–254)
What This Means (2025 FDD)
According to Aira Fitness's 2025 Franchise Disclosure Document, the company uses an adjusted market assessment approach to estimate the stand-alone selling price of pre-opening activities. Aira Fitness first allocates the initial franchise fees and any fixed consideration under the franchise agreement to the stand-alone selling price of training services that are not brand-specific. Then, any residual amount is allocated to the right to access Aira Fitness's intellectual property.
Consideration allocated to pre-opening activities that are not brand-specific is recognized ratably as those services are rendered. Consideration allocated to pre-opening activities included under Accounting Standards Update (ASU) to ASC 606, Franchisors—'Revenue from Contracts with Customers (Subtopic 952-606): Practical Expedient' is recognized when the related services have been rendered.
The remaining franchisee fee not allocated to pre-opening activities is recorded as Unearned Revenue and will be recognized over the term of the franchise agreement. This means that Aira Fitness defers the recognition of revenue from the initial franchise fee until the services related to pre-opening activities are completed or over the life of the franchise agreement.