Prior to 2023, how did Face Foundrie allocate the initial franchise fee?

According to Face Foundrie's 2025 Franchise Disclosure Document, prior to 2023, the company allocated the initial franchise fee between the pre-opening services obligation and the franchise license. The portion allocated to the franchise license was recognized over the life of the underlying agreement.

This means that before 2023, Face Foundrie recognized a portion of the initial franchise fee as revenue immediately, related to granting the franchise license itself. The remaining portion was tied to the pre-opening services they provided to the franchisee. This pre-opening services portion was recognized as revenue as Face Foundrie fulfilled those obligations, such as site selection assistance, training, and providing operational manuals.

However, the FDD states that effective for the year ended December 31, 2023, Face Foundrie changed its accounting practices. The company determined that the fair value of pre-opening services exceeded the initial fees received. As a result, the initial fees are now entirely allocated to pre-opening services. This change means that Face Foundrie now recognizes the entire initial franchise fee as revenue only when those pre-opening services have been completed, which typically occurs when the franchisee commences operations.