Over what period of time does Best Brains amortize franchising fee revenue?

According to Best Brains' 2025 Franchise Disclosure Document, the company amortizes franchising fee revenue over a period of five years from the start of the franchisee's location. This means that when Best Brains receives the initial franchise fee, they do not recognize it immediately as revenue. Instead, they defer the revenue recognition and spread it out evenly over the five-year period.

For a prospective Best Brains franchisee, this accounting practice has implications for understanding the company's financial statements. The deferred franchising fee revenue is recorded as a liability on Best Brains' balance sheet until it is recognized as revenue. As of December 31, 2024, Best Brains had $514,081 in deferred franchising fee revenue, and $136,168 as of December 31, 2023. This deferred revenue represents the portion of franchise fees that have been collected but not yet earned.

The FDD also states that Best Brains adopted Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606), effective January 1, 2019, retrospectively. This update outlines a single, comprehensive model for accounting revenue from contracts with customers. The initial franchise fees, collected upfront, are amortized over the life of the related franchise agreement, generally five years. This accounting method ensures that Best Brains recognizes revenue in alignment with the services and support provided to franchisees over the term of the franchise agreement.