When does Clean Your Dirty Face recognize revenue allocated to franchise rights?

According to Clean Your Dirty Face's 2025 Franchise Disclosure Document, revenue allocated to franchise rights is deferred until the store opens. Clean Your Dirty Face franchise agreements typically require franchisees to pay an initial, non-refundable fee before opening their location. In exchange, Clean Your Dirty Face provides franchise rights and pre-opening services such as operational materials, planning, functional training courses, and a grand-opening marketing plan. The company estimates the value of performance obligations related to certain pre-opening activities to approximate the initial franchise fee. Revenue is recognized when these services are performed and the location has opened.

For franchisees interested in opening multiple locations, Clean Your Dirty Face offers a multiunit development rider. This rider includes the fee for the first location and the franchise fees required to open up two additional locations under separate franchise agreements. The franchise agreement specifies that each subsequent location must be opened within a certain number of months following the opening of the prior location under a separate agreement. Franchise fee revenue related to the second and third locations opened under a multi-unit development rider is classified as deferred revenue until the specified time period has elapsed or a subsequent location has been opened, whichever is sooner.

Royalties, including franchisee contributions to marketing funds, are calculated as a percentage of franchise monthly gross sales over the term of the franchise agreement. These royalties are recorded monthly as revenue when earned. The marketing portion of the contributions paid by franchisees must be spent on advertising, marketing, and related activities, as stipulated in the franchise agreements.