Does the Dermani Medspa FDD provide all revenue recognition policies, or only some of the more pertinent ones?
Dermani_Medspa Franchise · 2025 FDDAnswer from 2025 FDD Document
udes many factors, including age of balance, payment history, credit worthiness and current economic trends. Based on this process, management did not provide for an allowance for credit losses as of December 31, 2023.
Prepaid Expenses
Prepayments consists of prepayments for fees for services rendered by Franchise Development LLC. The Company will recognize the broker fee and commission by amortizing them over the term of franchise agreement.
Furniture and Equipment
Furniture and equipment is stated at cost and depreciated using the straight‐line method over their useful lives. Estimated useful lives by asset class are as follows:
| Asset Class | Estimated Useful Life | |--------------------------------------|-----------------------------| | Computers | 5 years | | and | | | printers | | | Furniture | 7 years | | Medical devices & machinery | 10 years | Repairs and maintenance are charged to expense as incurred.
Advertising
Advertising costs are expensed as incurred and are made at the Company's discretion. Advertising expense for the year ended December 31, 2023 was $161,105.
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standard Codification(ASC) 606.
Franchise Sales
Franchise sales comprise revenue from the sale or renewal of franchises. A fee is charged upon sale or renewal. Under this arrangement, franchisees are granted the right to operate a center using the "dermani MEDSPA®" system for an initial term of ten (10) years with the right to renew for two (2) additional consecutive successor terms of five (5) years each subject to certain conditions being met. The
NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2023
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition (continued)
Company is required to provide initial training regarding the system and provide assistance in accordance to the Franchise Agreement.
The Company recognizes revenue from franchise fees during the year in which the related performance obligations are provided to franchisees. The Company has identified three performance obligations delivered as part of the franchise fee related to initial training of franchisees, store location assistance, and rights to intellectual property.
The performance obligation of training franchisees is satisfied at the time of training, and the related revenue is recognized at the time initial training is completed. The transaction price allocated to pre‐ opening training was determined using the cost plus margin approach.
Source: Item 23 — RECEIPTS (FDD pages 66–311)
What This Means (2025 FDD)
According to the 2025 Dermani Medspa FDD, the document outlines several key revenue recognition policies. Specifically, it details how Dermani Medspa recognizes revenue from franchise sales, royalty fees, and advertising costs. The FDD states that Dermani Medspa recognizes revenue in accordance with Accounting Standard Codification (ASC) 606.
For franchise sales, Dermani Medspa recognizes revenue when performance obligations are fulfilled, such as initial training, store location assistance, and providing rights to intellectual property. The revenue from training is recognized upon completion of the training, while revenue from store location assistance is recognized when the franchise agreement is signed. The revenue related to intellectual property rights is recognized ratably over the ten-year franchise agreement.
Regarding royalty fees, Dermani Medspa collects these weekly based on sales and recognizes them as sales occur. The weekly royalty fee is 5.00% of the franchisee's weekly sales, due by Wednesday for the prior week. Advertising costs are expensed as incurred, with advertising expenses for the year ended December 31, 2023, totaling $161,105. These policies provide franchisees with an understanding of how Dermani Medspa accounts for different revenue streams.