How does Alloy estimate the stand-alone selling price of distinct pre-opening activities?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company estimates the stand-alone selling price of pre-opening activities that are distinct using an adjusted market assessment approach. The Company first allocates the initial franchise fees and the fixed consideration under the franchise agreement to the stand-alone selling price of the pre-opening activities and the residual, if any, to the right to access the Company's intellectual property. Consideration allocated to pre-opening activities that are distinct are recognized when the franchisee location opens.
Source: Item 23 — RECEIPTS (FDD pages 69–245)
What This Means (2025 FDD)
According to Alloy's 2025 Franchise Disclosure Document, the company uses an adjusted market assessment approach to estimate the stand-alone selling price of distinct pre-opening activities. These activities are considered distinct if they benefit the franchisee and are not highly interrelated or interdependent with access to Alloy's intellectual property. This may also apply to portions of pre-opening activities that are not brand-specific and provide general business information separate from the Alloy franchise operation.
Alloy first allocates the initial franchise fees and any fixed consideration under the franchise agreement to the stand-alone selling price of these pre-opening activities. Then, any residual amount is allocated to the right to access Alloy's intellectual property.
The consideration allocated to these distinct pre-opening activities is recognized as revenue when the franchisee's location officially opens for business. This accounting method ensures that Alloy recognizes revenue for these services at the point when the franchisee can directly benefit from them.