For Bath Tune Up franchisees, how does the company fulfill inventory orders?
Bath_Tune_Up Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisees purchase inventory from certain vendors by placing the order through the Company which is fulfilled by the vendor. The inventory is shipped directly from the supplier to the franchisees and the Company does not bear the inventory risk and is not responsible for fulfilling the orders. Under ASC 606, the Company's performance obligation for product sales is satisfied upon the sale of a vendor's product through the Company's franchisees. As such, revenue is estimated and recorded upon receipt of the franchisee sales information from the vendor. The criteria for the Company acting as a principal in these transactions are not met. Therefore, the Company determined that it acts as an agent in these transactions recording revenue net of costs as the Company is the agent facilitating the transaction between the franchisee and the vendor. In addition, the Company does have a small percentage where inventory is received and then are sold to franchisees. For these transactions the Company is determined as the principal and revenues are not netted with cost.
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 51–52)
What This Means (2025 FDD)
According to Bath Tune Up's 2025 Franchise Disclosure Document, franchisees order inventory from approved vendors through the company. However, the vendor directly fulfills the order by shipping it to the franchisee. Bath Tune Up does not bear the inventory risk or the responsibility of fulfilling these orders, acting as an agent to facilitate the transaction.
Bath Tune Up's role is primarily to coordinate the sales of vendor products to its franchisees. The company estimates and records revenue upon receiving franchisee sales information from the vendor. This revenue is recorded net of costs, as Bath Tune Up acts as an agent in these transactions.
However, in a small percentage of cases, Bath Tune Up does receive inventory and then sells it to franchisees. In these specific transactions, Bath Tune Up is considered the principal, and revenues are not netted with costs. This indicates a dual role where the company primarily acts as an agent but occasionally takes on the responsibilities of a principal in inventory transactions.