What comprised the point-in-time revenues for Big Blue Swim School?

According to Big Blue Swim School's 2025 Franchise Disclosure Document, the company generates revenue from franchisees throughout the United States. These revenues are derived from contracts with franchisees and are categorized by the timing of revenue recognition and the type of revenue. This approach is used because Big Blue Swim School believes it accurately reflects how economic factors influence the nature, amount, timing, and uncertainty of revenue and cash flows. The economic risks to Big Blue Swim School's revenues depend on the overall strength of the U.S. economy and the company's ability to collect payments from its franchisees.

Big Blue Swim School recognizes revenue from several sources, including initial and renewal franchise fees, which are allocated to the right to access the company's intellectual property. These fees are recognized on a straight-line basis over the term of the respective franchise agreement. If a franchisee obtains development rights (DRAs) to open multiple units, the upfront fees paid for these rights are deferred and then apportioned to each individual franchise agreement that is eventually signed. The portion of the fee allocated to each franchise agreement is then recognized as revenue on a straight-line basis over the life of that agreement.

Royalties form another significant revenue stream for Big Blue Swim School. These royalties are calculated as a percentage of the franchisee's gross revenues and are earned over the term of the franchise agreement. Because these royalties are directly tied to the use of Big Blue Swim School's intellectual property, they are recognized as franchisee sales occur, provided that the royalties are deemed collectible. Additionally, Big Blue Swim School collects fees for a brand fund, which is used for advertising, marketing, research and development, public relations, social media management, and customer relationship management. These brand fund fees are also a percentage of the franchisee's gross revenues and are recognized as franchisee sales occur, similar to royalties.

Big Blue Swim School also has a market introduction program where franchisees contribute funds for marketing purposes. The company recognizes revenue and expenses related to this program on a gross basis, acting as the principal in collecting and administering the funds. Revenues from this program are typically received within a 12-month period and are recognized as marketing fees are charged and expenses are incurred. Finally, Big Blue Swim School recognizes revenues from other fees and services provided to franchisees when the services are rendered, treating each service as a single performance obligation.