When does Dermani Medspa recognize revenue related to the training of franchisees?
Dermani_Medspa Franchise · 2025 FDDAnswer from 2025 FDD Document
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 Dermani Medspa's 2025 Franchise Disclosure Document, the company recognizes revenue from franchise fees when they fulfill their performance obligations to franchisees. These obligations include initial training, store location assistance, and providing rights to intellectual property. Dermani Medspa recognizes revenue related to franchisee training at a specific point in time.
The FDD states that the performance obligation for training franchisees is considered satisfied once the training is completed. Consequently, Dermani Medspa recognizes the associated revenue at the time the initial training is completed. This means that the revenue isn't recognized when the franchise agreement is signed or over the term of the agreement, but rather upon completion of the training program.
This revenue recognition approach is important for prospective franchisees to understand, as it clarifies when Dermani Medspa accounts for the training portion of the franchise fee. The transaction price allocated to pre-opening training was determined using the cost plus margin approach.