What does Brain Balance consider when determining the transaction price for franchise rights?
Brain_Balance Franchise · 2025 FDDAnswer from 2025 FDD Document
bligation, resulting in the Company recognizing deferred revenue contract liabilities. Amounts that are expected to be recognized as revenue within one year are classified as current deferred revenue in the balance sheet. Deferred franchise revenue and deferred software licenses as of January 1, 2022 were approximately $287,000 and $226,000, respectively.
Allocating the Transaction Price
The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for providing franchisees with the franchise rights to open and operate centers. To determine the transaction price, the Company considers its customary business practices and the terms of the underlying agreement. For the purpose of determining transaction prices, the Company assumes performance obligations will be satisfied as promised in accordance with franchise agreements and that agreements will not be canceled or modified.
The Company's franchise agreements with franchisees have transaction prices that contain a fixed and variable component. Variable consideration includes revenue related to royalties, software fees, and advertising fees, as the transaction price is based on the franchisee's sales.
Source: Item 23 — RECEIPTS (FDD pages 72–292)
What This Means (2025 FDD)
According to Brain Balance's 2025 Franchise Disclosure Document, the company considers several factors when determining the transaction price for franchise rights. The transaction price is the amount Brain Balance expects to receive in exchange for granting franchisees the rights to open and operate centers.
To determine this price, Brain Balance considers its customary business practices and the terms of the underlying franchise agreement. For the purpose of determining transaction prices, Brain Balance assumes that it will satisfy its performance obligations as promised in accordance with the franchise agreements and that these agreements will not be canceled or modified.
The franchise agreements have both fixed and variable components in their transaction prices. The variable consideration includes revenue from royalties, software fees, and advertising fees, as these are based on the franchisee's sales. This variable consideration is recognized based on the actual amounts earned each month. Additionally, Brain Balance allocates consideration to training, center opening, and grand opening services based on the observable stand-alone selling price of third-party service providers offering similar training. The remaining consideration is then allocated to the franchise right itself.