When does Face Foundrie recognize revenue from pre-opening services after December 31, 2023?
Face_Foundrie Franchise · 2025 FDDAnswer from 2025 FDD Document
Prior to 2023, the Company allocated the franchise between the pre-opening services obligation and the franchise license (recognizing the amount allocated to the license over the life of the underlying agreement). Effective for the year ended December 31, 2023, the Company has determined that the fair value of pre-opening services exceeds the initial fees received; as such, the initial fees are allocated to the pre-opening services, which are recognized as revenue when those pre-opening services have been completed (generally upon commencement of operations).
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 73)
What This Means (2025 FDD)
According to Face Foundrie's 2025 Franchise Disclosure Document, the company recognizes revenue from pre-opening services when those services have been completed. This generally occurs when the franchisee commences operations. This policy went into effect for the year ending December 31, 2023.
Prior to 2023, Face Foundrie allocated the initial franchise fee between the pre-opening services obligation and the franchise license, recognizing the amount allocated to the license over the life of the underlying agreement. However, for the year ended December 31, 2023, Face Foundrie determined that the fair value of pre-opening services exceeded the initial fees received. As a result, the initial fees are now allocated to the pre-opening services.
For a prospective Face Foundrie franchisee, this means that the initial franchise fee is recognized as revenue by Face Foundrie only after they have fulfilled their pre-opening obligations, which typically happens when the franchise location begins operations. This accounting change reflects that the value of the pre-opening support and services provided by Face Foundrie is considered to be the primary component of the initial franchise fee.