How does Basecamp Fitness amortize franchise rights?
Basecamp_Fitness Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchise revenues consist primarily of franchise royalties, franchise fees, advertising fund contributions, and consumer fitness, health, and wellness applications. Franchise fees consist of initial franchise fees, area development agreement ("ADA") fees, master franchise fees, area representative fees, and transfer and renewal fees.
The Company's primary performance obligation under the franchise agreement is granting certain rights to use the Company's intellectual property over the term of each agreement. The Company has certain pre-opening services, including training and construction management, that are provided as part of the franchise agreement. These pre-opening activities are considered distinct from the franchise license and are therefore recognized upon opening of the franchise. The Company has elected the FASB's practical expedient related to pre-opening activities and does not analyze each separate activity as its own distinct performance obligation. The franchise fees remaining after any pre-opening performance obligations have been satisfied are recognized on a straight-line basis over the term of the respective agreement.
(in thousands of US dollars)
Franchise royalties, consumer fitness, health, and wellness application fees, and advertising fund contributions are collected as defined in the terms of the franchise agreements. Under the Company's franchise agreements, advertising fund contributi
Source: Item 23 — RECEIPTS (FDD pages 62–248)
What This Means (2025 FDD)
According to Basecamp Fitness's 2025 Franchise Disclosure Document, the company's primary performance obligation is granting rights to use their intellectual property over the term of the franchise agreement. Basecamp Fitness provides certain pre-opening services, such as training and construction management, as part of the franchise agreement. These pre-opening activities are considered distinct from the franchise license and are recognized upon the opening of the franchise.
Basecamp Fitness has elected the FASB’s practical expedient related to pre-opening activities and does not analyze each separate activity as its own distinct performance obligation. The franchise fees remaining after any pre-opening performance obligations have been satisfied are recognized on a straight-line basis over the term of the respective agreement. This means that the initial franchise fee, after deducting the value of pre-opening services, is recognized evenly as revenue throughout the duration of the franchise agreement.
For a prospective Basecamp Fitness franchisee, this accounting practice means that the initial franchise fee paid is not fully recognized as revenue by Basecamp Fitness until the entire term of the agreement has passed. This approach is common in franchising, as it aligns the revenue recognition with the ongoing rights and services provided to the franchisee throughout the franchise term. Franchise royalties, consumer fitness, health, and wellness application fees, and advertising fund contributions are collected as defined in the terms of the franchise agreements.