What is the typical timeframe for Beauty Bungalows franchisees to open their business to the public?
Beauty_Bungalows Franchise · 2025 FDDAnswer from 2025 FDD Document
Performance obligations that are normally satisfied by the opening of the franchised business to the public are determined to be earned during the period from the execution of the contract to the opening of the franchised business which is generally less than one year. Unearned initial fee revenues from franchisee acquisition and acceptance will be recorded as deferred nonrefundable revenue and recognized as revenue over the term of the contract which is currently 10 years from the date the franchisee opens the franchise business to the public. Incremental costs of obtaining a franchise agreement with a franchisee related to unsatisfied performance obligations will be recorded as a franchise acquisition asset and are recognized as cost of sales over the same term as the related performance obligation which is currently 10 years.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 47)
What This Means (2025 FDD)
According to Beauty Bungalows' 2025 Franchise Disclosure Document, the time it takes for a franchisee to open their business to the public is generally less than one year. This timeframe is relevant to how Beauty Bungalows recognizes revenue from initial franchise fees.
Specifically, Beauty Bungalows allocates initial franchise fees to several performance obligations, including training, support services, marketing assistance, and franchisee acquisition. The revenue from these fees is recognized when Beauty Bungalows has fulfilled these obligations and transferred control of the goods or services to the franchisee. For obligations typically completed by the time the franchise opens, Beauty Bungalows recognizes the revenue during the period between the contract execution and the store opening.
For franchisee acquisition and acceptance, Beauty Bungalows defers the revenue recognition. This unearned revenue is recorded as deferred nonrefundable revenue and is recognized over the 10-year term of the franchise agreement, starting from the date the franchisee opens their Beauty Bungalows business. This approach aligns revenue recognition with the ongoing benefits and support provided to the franchisee throughout the agreement term.