Over what period does Best Brains amortize initial franchise fees?
Best_Brains Franchise · 2025 FDDAnswer from 2025 FDD Document
to appropriate operating accounts at the time the expense is incurred. Expenditures determined to represent additions and improvements are capitalized if the amount is greater than $1,000.
| | | December 31, 2024 December 31, 2023 | |--------------------------
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 42)
What This Means (2025 FDD)
According to Best Brains' 2025 Franchise Disclosure Document, the initial franchise fees are amortized over a period of five years. This means that Best Brains recognizes the revenue from these fees gradually over the term of the franchise agreement, rather than recognizing it all upfront when the fee is collected.
For a prospective Best Brains franchisee, this accounting practice has no direct financial impact on their business operations. However, it provides insight into how the franchisor recognizes revenue and manages its financial reporting. The deferred franchising fee revenue was reported as $514,081 and $136,168 as of December 31, 2024, and 2023, respectively.
This approach is common in the franchise industry, as it aligns the revenue recognition with the ongoing services and support that the franchisor provides to the franchisee throughout the franchise term. It also reflects the accounting standards issued by the Financial Accounting Standards Board (FASB).