How are prepaid expenses recognized and treated over time for Basecamp Fitness?

According to Basecamp Fitness's 2025 Franchise Disclosure Document, prepaid expenses primarily consist of payments made in advance for goods and services that will be received in future periods. As of December 31, 2024 and 2023, these expenses include prepaid interest, prepaid inventory, and other operating prepaid expenses.

For a Basecamp Fitness franchisee, this means that if you pay for goods or services before you actually receive them, the expense is initially recorded as a prepaid expense, which is considered a current asset on the balance sheet. This is a common accounting practice that ensures expenses are matched with the periods in which the benefits are realized.

The FDD states that prepaid expenses are amortized over the periods in which the related benefits are realized. Amortization is the process of gradually writing off the initial cost of an asset. In the context of prepaid expenses, this means that the prepaid amount is gradually recognized as an expense on the income statement over the period that the goods or services are used or consumed. This approach aligns the expense with the revenue it helps to generate, providing a more accurate picture of Basecamp Fitness's profitability during those periods.