What is the significance of the year-to-date revenue figures for Brain Balance?
Brain_Balance Franchise · 2025 FDDAnswer from 2025 FDD Document
y the franchisee or due to the default of the franchisee, the Company recognizes the remaining initial franchise fee as revenue earned, as no further performance obligations need to be satisfied, and the initial franchise fee is not refundable per the franchise agreement.
December 31, 2024, 2023, and 2022
Note 2 - Significant Accounting Policies (Continued)
Enrollment and virtual program kit revenue represents the fees earned by the Company from the enrollment kits that are purchased by franchisees from a third-party supplier and the Company, respectively. These kits are given to students as part of their enrollment in the center, and revenue is recognized at the time of purchase. The Company has determined that it is acting as principal in these transactions, as the Company assumes the inventory and has responsibility to provide goods based on its specifications. Coaching fee revenue represents fees earned by the Company for additional coaching and trainings requested by the franchisees. Revenue is recognized over time as the coaching is provided. Other revenue consists of fees 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)
Based on the 2025 Franchise Disclosure Document, Brain Balance's financial statements provide a snapshot of the company's revenue recognition practices. The company generates revenue from various sources, including franchise fees, royalties, advertising fees, enrollment kits, virtual program kits, software fees, coaching, and other services. Understanding how and when Brain Balance recognizes revenue is crucial for franchisees to assess the financial health and stability of the franchisor. For instance, initial franchise fees are allocated between training and the franchise right, with revenue recognized over the respective periods the training is provided and the franchise agreement is active. This approach aligns revenue recognition with the delivery of services and rights to the franchisee.
Notably, the FDD mentions that 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. This point-in-time revenue primarily comes from sources like annual conferences and settlements from terminated franchisees. The advertising fund, supported by franchisee contributions, is another key aspect. The FDD specifies that advertising fees are collected monthly, typically as a percentage of the franchisee's gross sales, and are used for brand promotion. The document also indicates that any excess revenue in the advertising fund is accrued for use in subsequent years, with specific amounts accrued as of December 31 in 2024, 2023, and 2022.
For a prospective franchisee, these figures offer insights into the revenue streams and financial management of Brain Balance. Understanding the timing of revenue recognition, the composition of revenue sources, and the handling of advertising funds can help franchisees evaluate the franchisor's financial practices and plan their own business strategies. It's important to note that the financial statements included in the FDD have not been audited by an independent certified public accountant. Therefore, prospective franchisees should consider this when reviewing the financial information and may want to seek independent financial advice to fully understand the implications.