How does Brain Balance account for advertising expenses (exclusive of the franchisee advertising fund) on its financial statements?

According to Brain Balance's 2025 Franchise Disclosure Document, advertising expenses, not including those from the franchisee advertising fund, are recorded as expenses during the year they are incurred. This means that Brain Balance recognizes these costs on its income statement in the same period that the advertising activities take place.

For the years 2024, 2023, and 2022, Brain Balance's advertising expenses were $236,286, $132,425, and $104,885, respectively. This shows a year-over-year increase in advertising spending. This accounting method provides transparency into the company's financial performance, allowing potential franchisees to see how much Brain Balance has invested in advertising in previous years.

It's important to note that this accounting treatment applies specifically to advertising expenses outside of the franchisee advertising fund. The franchisee advertising fund, which is supported by franchisee contributions, has its own accounting procedures. The FDD states that advertising fees are collected monthly, based on a percentage of franchisee gross sales, and are recognized when the underlying sales occur. The related advertising expenses are recorded as incurred. Any excess revenue in the advertising fund is accrued to be used in subsequent years. As of December 31, 2024, 2023, and 2022, the advertising fund accrued expenses were $77,535, $133,665, and $232,489, respectively, with cash restricted for advertising fund expenses being $83,542, $134,030, and $121,060, respectively.