What was the total revenue from franchise sales for Dermani Medspa in the provided data?
Dermani_Medspa Franchise · 2025 FDDAnswer from 2025 FDD Document
Unearned revenue relates to the unsatisfied future performance obligations associated with the issuance of franchise agreements. Initial franchise fees are received upon the franchisee's signing of a franchise agreement and recognized over the terms of the respective franchise agreements, which are typically ten years once the related locations are opened. Three performance obligations are identified related to initial franchise fees as described in the revenue recognition disclosure.
Advertising and Marketing
Advertising and marketing costs are expensed as incurred and are made at the Company's discretion. Advertising and marketing expenses for the year ended December 31, 2024 was $248,452.
Revenue Recognition
The Company recognizes revenue in accordance with FASB Accounting Standard Codification (ASC) 606, Revenue from Contracts with Customers. Some of the more pertinent revenue recognition policies are as follows:
NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2024
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition (Continued)
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 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.
Source: Item 23 — RECEIPTS (FDD pages 66–311)
What This Means (2025 FDD)
The 2025 Dermani Medspa FDD includes information about how the company recognizes revenue from franchise sales, but it does not state the total revenue from franchise sales. The FDD states that franchise sales comprise revenue from the sale or renewal of franchises, for which a fee is charged. Dermani Medspa recognizes revenue from franchise fees when they fulfill their performance obligations to franchisees, which include initial training, store location assistance, and providing rights to intellectual property.
The revenue from training franchisees is recognized when the initial training is completed. The revenue from store location assistance is recognized when the franchisee's agreement is signed. The revenue from providing the right to intellectual property is recognized ratably over the ten-year franchise agreement.
The FDD also indicates that $1,350,595 of initial franchise fees received have not been earned by the Company as of December 31, 2024. This suggests that Dermani Medspa has received these fees but has not yet fulfilled all the related performance obligations to recognize them as earned revenue. A prospective franchisee should inquire with Dermani Medspa about the total revenue from franchise sales for specific periods to gain a clearer understanding of the company's financial performance.