For Dermani Medspa, over what period is revenue recognized for providing the right to intellectual property?

According to Dermani Medspa's 2025 Franchise Disclosure Document, the performance obligation of providing the right to intellectual property is recognized ratably over the course of the ten-year franchise agreement. This means that Dermani Medspa does not recognize the entire franchise fee related to intellectual property immediately. Instead, it spreads the recognition of this revenue evenly over the duration of the franchise agreement.

For a prospective Dermani Medspa franchisee, this accounting practice means that the franchisor recognizes revenue related to the intellectual property rights gradually over the term of the agreement. The transaction price allocated to intellectual property is determined using the residual approach.

This approach is standard in franchising, as the franchisee benefits from the franchisor's intellectual property (brand, trademarks, systems) throughout the entire term. Recognizing the revenue ratably aligns the revenue recognition with the period over which the service (access to intellectual property) is provided.