What is the difference between brand-specific and non-brand-specific pre-opening activities for a Fly To Fit franchise?

According to Fly To Fit's 2024 Franchise Disclosure Document, pre-opening activities are categorized into brand-specific and non-brand-specific components. Fly To Fit considers pre-opening activities that provide franchisees with general business information, separate and distinct from the operation of a Fly To Fit branded franchise unit, as non-brand specific. These activities are expected to benefit the franchisee independently and are not highly interrelated or interdependent with access to Fly To Fit's intellectual property. Therefore, they are accounted for as a separate distinct performance obligation.

In contrast, brand-specific pre-opening activities are those that are highly interrelated and interdependent with access to Fly To Fit's intellectual property. These activities are essential for operating a Fly To Fit franchise and are thus considered part of a single performance obligation. This obligation is fulfilled by granting franchisees the rights to access Fly To Fit's intellectual property over the term of the franchise agreement.

This distinction is important for accounting purposes, as it affects how Fly To Fit recognizes revenue. Non-brand-specific pre-opening activities are recognized ratably as those services are rendered. The remaining franchisee fee not allocated to pre-opening activities are recorded as Unearned Revenue and will be recognized over the term of the franchise agreement. Prospective franchisees should understand this distinction, as it clarifies what services are considered part of the core franchise offering and how Fly To Fit accounts for them.