How are Brain Balance franchisees taxed on their share of the company's earnings?

According to Brain Balance's 2025 Franchise Disclosure Document, the company is treated as a partnership for federal income tax purposes. Because of this structure, Brain Balance itself does not pay federal income taxes. Instead, the company's member (likely Brain Balance Holdings, Inc., the parent company) is taxed individually on their pro rata ownership share of the company's earnings. The FDD states that the company's net income or loss is allocated to the member in accordance with the company's operating agreement.

For a Brain Balance franchisee, this information is relevant because it clarifies that the franchisee does not directly receive a share of the company's earnings. Instead, the company's profits and losses are passed through to its member, who is then responsible for paying taxes on those earnings at the individual level. The franchisee's tax obligations will be related to the earnings of their individual franchise location, not the earnings of the overall Brain Balance company.

This pass-through taxation structure is common for franchises, as many operate as limited liability companies (LLCs) or partnerships. It avoids double taxation, where the company pays taxes on its profits, and then the owners pay taxes again when they receive distributions. Prospective franchisees should consult with a tax advisor to understand the full tax implications of owning a Brain Balance franchise, including how their individual tax situation will be affected by the franchise's earnings and expenses.