When is variable sales-based NAF fees recognized as revenue for Bath Tune Up?

According to Bath Tune Up's 2025 Franchise Disclosure Document, variable sales-based National Advertising Fund (NAF) fees are recognized as revenue in the same period that the franchisee generates the sales. These fees are considered variable consideration because they are directly tied to the franchisee's sales performance. This means that Bath Tune Up does not need to estimate a future transaction price for these fees.

This accounting practice aligns with the nature of NAF fees, which are intended to fund national advertising efforts that benefit all franchisees. By recognizing the revenue in the same period as the sales, Bath Tune Up ensures that the advertising fund accurately reflects the current sales activity of the franchise system. This approach provides transparency and accountability in how advertising funds are managed and utilized.

For a prospective Bath Tune Up franchisee, this means that the NAF fees they contribute will be recognized as revenue by the franchisor in the same period that they, the franchisee, make the sales. This system ensures that advertising efforts are closely aligned with sales performance, potentially leading to more effective marketing strategies and a stronger brand presence. Additionally, franchisees can be assured that the franchisor is promptly accounting for and allocating these advertising funds.