When is consideration allocated to distinct pre-opening activities recognized by Alloy?

According to Alloy's 2025 Franchise Disclosure Document, Alloy recognizes consideration allocated to distinct pre-opening activities when the franchisee's location opens. Alloy's primary performance obligation under the franchise agreement includes granting rights to intellectual property and various pre-opening activities like site selection and training. Some of these pre-opening activities are considered distinct if they benefit the franchisee and are not highly interrelated or interdependent with access to Alloy's intellectual property.

For pre-opening activities that are not brand-specific and provide general business information separate from the Alloy franchise, Alloy deems these as distinct and accounts for them as separate performance obligations. All other pre-opening activities are considered highly interrelated to the use of Alloy's intellectual property and are accounted for as a single performance obligation, satisfied by granting rights to use the intellectual property over the franchise agreement term.

Alloy estimates the stand-alone selling price of distinct pre-opening activities using an adjusted market assessment approach. The initial franchise fees and fixed consideration are allocated to the stand-alone selling price of these pre-opening activities, with any residual amount allocated to the right to access Alloy's intellectual property. This means that Alloy recognizes revenue for these specific pre-opening services only once the franchisee's location is open and operational, aligning revenue recognition with the actual delivery and benefit of those distinct services.