What costs does Alloy capitalize and amortize related to the sale of franchises?

According to Alloy's 2025 Franchise Disclosure Document, Alloy capitalizes direct and incremental costs associated with the sale of franchises. These costs primarily consist of commissions. Alloy then amortizes these costs over the term of the franchise agreement.

For prospective Alloy franchisees, this means that Alloy accounts for the expenses it incurs in securing a new franchisee (like commissions paid to its sales team) as an investment. Instead of expensing these costs immediately, Alloy spreads them out over the life of the franchise agreement. This accounting practice can impact Alloy's financial statements, potentially showing lower expenses in the initial periods and a more consistent expense recognition over time.

Additionally, the FDD states that in the case of costs paid related to MUDAs (Multi-Unit Development Agreements) for which no signed franchise agreement has been received, these costs are deferred until the signed franchise agreement is received. This means that Alloy waits to recognize these costs until the deal is finalized, which is a conservative accounting approach. This policy ensures that Alloy only capitalizes costs for franchise sales that are actually completed, providing a more accurate picture of their financial performance.