Fiscal Years

The Company operates on a 52-/53-week fiscal year ending on the Sunday nearest to December 31. The fiscal year ended December 29, 2024 contained 52 weeks; the fiscal year ended December 31, 2023 contained 53 weeks; and the fiscal year ended December 25, 2022 contained 52 weeks.

Restricted Cash

The Company established and has collected contributions for a National Marketing Agency Fund pursuant to the Franchise Disclosure Document and individual franchise agreements, which are reflected as restricted cash on the balance sheet.

Accounts Receivable

The Company's accounts receivable balance consists of franchise fees, pass-through expenses due from franchisees, and royalties. Trade accounts receivable are stated at invoice amounts. An allowance for expected credit losses is considered by the Company on an ongoing basis. At December 29, 2024; December 31, 2023; and December 25, 2022, the Company did not record an allowance for credit losses, as the Company determined that there is minimal risk of credit losses based on historical losses, as well as current and future conditions, and that any such credit losses would be insignificant to these financial statements. Accordingly, for the years ended December 29, 2024; December 31, 2023; and December 25, 2022, there were no write-offs of trade accounts receivable.

Accounts receivable as of December 27, 2021 was $77,185.

December 29, 2024; December 31, 2023; and December 25, 2022

Note 2 - Significant Accounting Policies (Continued)

Notes Receivable

Notes receivable are reported at original issue amount plus accrued interest, less principal repaid. Interest is recognized according to the terms of the specific notes. An allowance for loan losses is based on a specific assessment of all notes that are delinquent or determined to be doubtful to be collected. Notes are considered delinquent if the repayment terms are not met. All amounts deemed to be uncollectible are charged against the allowance for loan losses in the period that determination is made. The notes were repaid in full during 2022.

Capitalized Software Costs

The Company incurred costs related to the development of a website and the new point-of-sale system. The software is being amortized over a three-year period. The total cost capitalized as of December 29, 2024; December 31, 2023; and December 25, 2022 was $860,279, $758,679, and $758,679, respectively. Costs incurred prior to the final selection of software and costs not qualifying for capitalization are charged to expense. Amortization expense was $50,629, $211,841, and $214,803 for the fiscal years ended in 2024, 2023, and 2022, respectively. Total accumulated amortization was $764,289, $721,610, and $509,769 as of December 29, 2024; December 31, 2023; and December 25, 2022, respectively.

Revenue Recognition

The Company's revenue mainly consists of franchise fees, royalties, and marketing fund revenue. The Company sells individual franchisees the right to operate a company location within a defined territory using the Company's brand name. The initial term of franchise agreements is typically 10 years with an option to renew for a fee or transfer the franchise agreement to a new or existing franchisee, at which point a transfer or renewal fee is typically paid.

The Company has obligations to provide franchisees with the franchise rights to operate a barbershop, training, and site selection, as well as to provide technology and marketing, for which fees are charged. The Company has concluded that these items represent a single performance obligation. Therefore, initial franchise fees for each agreement are allocated to each individual franchise and recognized over the term of the respective franchise agreement, beginning on the date the store is opened. Renewal fees are recognized over the renewal term for the respective franchise. Transfer fees are recognized over the remaining term of the franchise agreement, beginning at the time of transfer. Income for royalties and advertising fees is recognized over the term of the respective franchise agreement as the underlying sales occur.

When a franchise agreement is terminated voluntarily by the franchisee or due to the default of the franchisee, the Company recognizes the remaining initial franchise fee as revenue earned, as no further performance obligations need to be satisfied, and the initial franchise fee is not refundable per the franchise agreement.

The Company also enters into area development agreements with franchisees. The development agreement is for a specified territory and requires an upfront development fee for each expected location, payable upon execution of the development agreement, with the balance of the full franchise fee for each location due upon lease execution. The number of units in the development agreement, the geographic territory outline, and the length of time that the franchisee has the exclusive right to develop those units vary by the territory and the agreement between the Company and the franchisee. The area development agreement is considered a part of the overall contract between the Company and the franchisee, as it is negotiated with a single commercial objective to open a specific number of locations in a defined geographic territory or market. These area development agreements represent an attribute of the franchise right (single performance obligation with the franchise right).

December 29, 2024; December 31, 2023; and December 25, 2022

Note 2 - Significant Accounting Policies (Continued)

The Company incurs broker or sales commission expenses paid to employees or third parties to obtain franchise agreements with franchisees. As such commissions are incurred directly as a result of the signed franchise agreements, these costs are deferred and recognized over the term of the respective franchise agreements. Deferred franchise costs as of December 29, 2024 were $291,750. There were no deferred franchise costs as of December 31, 2023; December 25, 2022; and December 26, 2021.

Payment Terms

The Company's franchise agreements require the payment of various fixed and variable fees. Initial franchise, renewal, and transfer fees are due and typically paid when a franchise agreement is executed and are nonrefundable. These fees are collected prior to the satisfaction of the Company's performance obligations, resulting in the Company recognizing deferred revenue contract liabilities. Royalties and marketing fees are paid on a monthly basis based upon a percentage of franchisee gross sales. Deferred revenue as of December 29, 2024; December 31, 2023; December 25, 2022; and December 26, 2021 was $1,723,029, $1,300,645, $1,247,119, and $1,289,286, respectively.

Allocating the Transaction Price

The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for providing franchisees the franchise rights to open and operate a shop. To determine the transaction price, the Company considers its customary business practices and the terms of the underlying agreement. For the purpose of determining transaction prices, the Company assumes performance obligations will be satisfied as promised in accordance with franchise agreements and that the agreements will not be canceled or modified.

The Company's franchise agreements with franchisees have transaction prices that contain a fixed and variable component. Variable consideration includes revenue related to royalties and marketing fees, as the transaction price is based on the franchisees sales. The variable consideration is recognized based on the actual amounts earned each month.

National Marketing Agency Fund Revenue Recognition

Under the terms of the standard franchise agreement, the Company has established a National Marketing Agency Fund (the "Fund") and charges a fee of up to 2 percent of each franchisee's gross receipts to pay for marketing costs that benefit multiple franchisees and promote the brand. The Company recognizes this sales-based marketing revenue as earned monthly and recognizes the related marketing expenses as incurred.

Income Taxes

The Company is treated as a partnership for federal income tax purposes. Consequently, federal income taxes are not payable or provided for by the Company. The member is taxed individually on its pro rata ownership share of the Company's earnings. The Company's net income or loss is allocated to the member in accordance with the Company's operating agreement.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Subsequent Events

The financial statements and related disclosures include evaluation of events up through and including March 20, 2025, which is the date the financial statements were available to be issued.

December 29, 2024; December 31, 2023; and December 25, 2022

Note 3 - Related Party Transactions

Joint and Several Liabilities

During 2020, Holdings received funding through the Main Street Loan Program, for which the Company was jointly and severally liable. In the event of a default by the affiliate, the Company, together with its affiliates, could have been obligated to repay the full amount outstanding on these loans. During 2024, the Main Street Loan Program was paid in full, and, as of December 29, 2024, there are no liabilities held by Holdings for which the Company is jointly and severally liable.

Royalty and Marketing Fees

In 2022, the Company began charging royalty and marketing fees to corporate-owned stores, which are held in entities affiliated through common ownership. The following is a summary of royalty and marketing fee revenue with affiliates for the years ended December 29, 2024; December 31, 2023; and December 25, 2022:

| 1. | BACKGROUND. Tenant | will operate | a FLOYD’S 99 Barbershop | at the Premises |

Source: Item 23 — RECEIPT (FDD pages 58–229)