How does Goldfish Swim School allocate consideration to site selection services?
Goldfish_Swim_School Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company has obligations to provide franchisees with the franchise rights to operate a school, training, and site selection, as well as technology and advertising for which fees are charged. The Company has concluded that management training and site selection are separate performance obligations due to the nature of these services being nonbrand specific and capable of being used by the franchisee in other businesses. The remaining items represent a single performance obligation. Therefore, initial franchise fees for each agreement are allocated to the management training, site selection, and franchise right for each individual franchise. The management training and site selection revenue is recognized at the time the obligations have been satisfied. The franchise right revenue is recognized over the term of the respective franchise agreement beginning on the date the school is opened.
Source: Item 22 — CONTRACTS (FDD pages 76–77)
What This Means (2025 FDD)
According to the 2025 Goldfish Swim School FDD, the company allocates a portion of the initial franchise fees to cover site selection services. Goldfish Swim School considers site selection a separate performance obligation from granting the franchise rights, as it is a non-brand-specific service that franchisees could potentially use in other business ventures. This means that a portion of the initial franchise fee is specifically earmarked for the site selection assistance provided to the franchisee. The revenue allocated to site selection is recognized at the time Goldfish Swim School fulfills its obligations related to these services.
This allocation has implications for how Goldfish Swim School recognizes revenue and how franchisees receive value from the initial fees. By separating site selection as a distinct performance obligation, Goldfish Swim School can recognize the revenue associated with these services once they are completed, rather than over the entire term of the franchise agreement. For the franchisee, this means that a portion of their initial investment is directly tied to the site selection support they receive, highlighting the importance Goldfish Swim School places on finding suitable locations for its swim schools.
Prospective franchisees should understand that the initial franchise fee covers not only the right to operate a Goldfish Swim School but also specific services like site selection and management training. The FDD indicates that the initial franchise fees are nonrefundable and are typically paid when the franchise agreement is executed. This means franchisees pay for these services upfront, and Goldfish Swim School recognizes the revenue once the obligations for site selection and management training are satisfied. The remaining portion of the initial franchise fee, related to the franchise rights, is recognized over the term of the franchise agreement, starting when the school opens.
In summary, Goldfish Swim School allocates a portion of the initial franchise fee to site selection services, treating it as a separate performance obligation. This approach allows the company to recognize revenue for these services upon completion and emphasizes the value placed on site selection support for franchisees. Franchisees should be aware of this allocation, understanding that a portion of their initial investment is specifically designated for site selection assistance.