What was the total amount of Brain Balance's deferred franchise costs as of January 1, 2022?
Brain_Balance Franchise · 2025 FDDAnswer from 2025 FDD Document
31, 2024, 2023, and 2022**
Note 2 - Significant Accounting Policies (Continued)
The Company allocates consideration to the training, center opening, and grand opening services provided based on the observable stand-alone selling price of third-party service providers of similar training. The remaining consideration is allocated to the franchise right.
Costs to Obtain a Franchise Agreement
The Company occasionally incurs broker commissions paid
Source: Item 23 — RECEIPTS (FDD pages 72–292)
What This Means (2025 FDD)
According to Brain Balance's 2025 Franchise Disclosure Document, the company had $96,992 in deferred franchise costs as of January 1, 2022. These costs primarily consist of broker commissions paid to third parties and bonuses paid to employees for securing franchise agreements.
Brain Balance capitalizes these commissions and bonuses as deferred franchise costs because they are directly related to franchise fee revenue, which is recognized over time. Instead of expensing these costs immediately, Brain Balance spreads the expense over the term of the respective franchise agreement. This accounting method aligns the expense recognition with the revenue recognition, providing a more accurate picture of the company's financial performance.
For a prospective Brain Balance franchisee, this deferred cost accounting means that the initial franchise fee paid to Brain Balance is not fully recognized as revenue by Brain Balance upfront. Instead, it is recognized gradually over the life of the franchise agreement. This practice is common in the franchise industry, as it reflects the ongoing obligations and support that the franchisor provides to the franchisee throughout the term of the agreement.