How are advertising fees collected from Brain Balance franchisees, and when are they recognized?
Brain_Balance Franchise · 2025 FDDAnswer from 2025 FDD Document
charged for the annual conference and settlements from terminated franchisees. Annual conference revenue is recognized over time as the conference occurs. Revenue from settlements is recognized at a point in time when the settlement is reached. For the years ended December 31, 2024, 2023, and 2022, revenue recognized at a point in time was $1,255,867, $1,198,850, and $1,470,031, respectively.
The Company has created a national advertising fund. An advertising fee is due monthly from each franchisee pursuant to the franchise agreement. Advertising and marketing expenses are incurred to promote brand awareness and include, but are not limited to, market and consumer research, media relations, advertising, and promotional marketing materials. Advertising fees are collected on a monthly basis, primarily based upon a percentage of franchisee gross sales. The Company recognizes these sales-based advertising fees from franchisees when the underlying franchisee sales occur. The Company records the related advertising expenses as incurred. When revenue of the advertising fund exceeds the related
Source: Item 23 — RECEIPTS (FDD pages 72–292)
What This Means (2025 FDD)
According to Brain Balance's 2025 Franchise Disclosure Document, franchisees are required to pay an advertising fee on a monthly basis. The amount is typically calculated as a percentage of the franchisee's gross sales. These advertising fees are intended to promote brand awareness through various marketing efforts, including market research, media relations, advertising, and promotional materials.
Brain Balance recognizes advertising fees as revenue during the same period that the underlying franchisee sales occur. This means that as franchisees make sales, a portion of the advertising fees collected from those sales is recognized as revenue by Brain Balance. The company records the related advertising expenses as they are incurred.
It's worth noting that Brain Balance has established a national advertising fund. If the revenue of this fund exceeds the advertising expenses, the excess is accrued up to the amount of revenue to be utilized in the subsequent year. As of December 31, 2024, 2023, and 2022, the advertising fund accrued expenses included $77,535, $133,665, and $232,489, respectively. Additionally, the amount of cash restricted for advertising fund expenses as of the same dates was $83,542, $134,030, and $121,060, respectively.