How does Dermani Medspa recognize revenue from training classes offered to the general public?
Dermani_Medspa Franchise · 2025 FDDAnswer from 2025 FDD Document
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 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.
The performance obligation of store location assistance is satisfied at the time a franchisee's agreement is signed and the related revenue is recognized at the time the agreement is signed. The transaction price allocated to store location assistance was determined using the cost plus margin approach.
The performance obligation of providing the right to intellectual property is simultaneously received and consumed by franchisees, and is thus recognized ratably over the course of the ten year franchise agreement. The transaction price allocated to intellectual property is determined using the residual approach.
Royalty Fees
Revenues from royalties are collected each week based on weekly sales, and are therefore recognized each week as sales take place.
Source: Item 23 — RECEIPTS (FDD pages 66–311)
What This Means (2025 FDD)
Based on the 2025 Dermani Medspa FDD, the document discusses revenue recognition related to franchise fees and royalty fees, but it does not specifically address how Dermani Medspa recognizes revenue from training classes offered to the general public. The FDD details that revenue from franchise fees is recognized when performance obligations like initial franchisee training, store location assistance, and intellectual property rights are fulfilled. Initial training revenue is recognized upon completion of the training. Royalty fees are recognized weekly based on sales.
Since the document does not explicitly state the revenue recognition method for training classes offered to the general public, it is unclear whether these classes are a regular part of Dermani Medspa's revenue streams or if they are treated differently from franchisee training. The FDD does mention the company provides clients with laser hair removal, skin rejuvenation, chemical peels, dermaplaning, injections and other products, but does not mention training classes for the general public.
A prospective franchisee should ask Dermani Medspa for clarification on how revenue from training classes offered to the general public is recognized. Understanding this will provide a clearer picture of all potential revenue streams and the associated accounting practices.