Over what period does Better Blend recognize revenue related to franchise fees?

According to Better Blend's 2024 Franchise Disclosure Document, the company recognizes franchise fee revenue over the term of the franchise agreement. The document states that franchise fee and development fee revenues are recognized when performance obligations are satisfied. Management has determined that the performance obligations related to franchise fees are satisfied over time. Therefore, Better Blend recognizes the revenue associated with these fees gradually throughout the duration of the franchise agreement.

For a prospective franchisee, this means that Better Blend does not recognize the entire initial franchise fee as revenue immediately upon payment. Instead, Better Blend spreads the recognition of this revenue over the life of the franchise agreement. This accounting practice is important for understanding Better Blend's financial statements, as the deferred revenue is recorded as a liability on the balance sheet until it is recognized as revenue.

This approach is a common practice in the franchise industry, as it aligns revenue recognition with the ongoing services and support that the franchisor provides to the franchisee throughout the term of the agreement. It reflects the fact that the franchise fee is not solely for the initial right to open a franchise but also for the continued use of the Better Blend brand, systems, and support.