What are some examples of pre-opening activities that Bombs Away considers to be brand specific?
Bombs_Away Franchise · 2024 FDDAnswer from 2024 FDD Document
The Company's primarily performance obligation under the franchise agreement mainly includes granting certain rights to access the Company's intellectual property and a variety of activities relating to opening a franchise unit, including initial training and other such activities commonly referred to collectively as "pre-opening activities", which are recognized as a single performance obligation. The Company expects that certain pre-opening activities provided to the franchisee will not be brand specific and will provide the franchisee with relevant general business information that is separate and distinct from the operation of a company-branded franchise unit. The portion of pre-opening activities that will be provided that is not brand specific is expected to be distinct as it will provide a benefit to the franchisee and is expected not to be highly interrelated or interdependent to the access of the Company's intellectual property, and therefore will be accounted for as a separate distinct performance obligation. All other pre-opening activities are expected to be highly interrelated and interdependent to the access of the Company's intellectual property and therefore will be accounted for as a single performance obligation, which is satisfied by granting certain rights to access the Company's intellectual property over the term of each franchise agreement.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 35)
What This Means (2024 FDD)
According to the 2024 Bombs Away FDD, the company distinguishes between pre-opening activities that are brand-specific and those that are not. The brand-specific activities are considered highly interrelated and interdependent to the access of Bombs Away's intellectual property. These activities are treated as a single performance obligation, which is fulfilled by granting rights to access the company's intellectual property over the franchise agreement term.
Conversely, pre-opening activities that are not brand specific provide franchisees with relevant general business information separate and distinct from the operation of a Bombs Away franchise. These activities are expected to benefit the franchisee and are not highly interrelated or interdependent with access to Bombs Away's intellectual property. As such, they are accounted for as a separate distinct performance obligation.
The FDD does not provide explicit examples of pre-opening activities that Bombs Away considers brand-specific. It only generally describes how these activities relate to the franchisee's access to the company's intellectual property. A prospective franchisee should seek clarification from Bombs Away regarding specific examples of both brand-specific and non-brand-specific pre-opening activities to fully understand the scope of services provided and how they are accounted for.