What pre-opening services does Learningrx include as a single distinct performance obligation?
Learningrx Franchise · 2025 FDDAnswer from 2025 FDD Document
In allocating the transaction price and recognizing the revenue associated with initial franchise fees, the Corporation has elected to adopt the practical expedient for private company franchisors outlined in ASC 952-606, Franchisors—Revenue from Contracts with Customers. The practical expedient allows franchisors to account for pre-opening services as a single distinct performance obligation. These preopening services include the following:
- Assistance in the selection of a site
- Assistance in obtaining facilities and preparing the facilities for their intended use, including related financing, architectural, and engineering services, and lease negotiation
- Training of the franchisee's personnel or the franchisee in the LearningRx processes and systems
- Preparation and distribution of manuals and similar material concerning operations, administration, and record keeping
- Bookkeeping, information technology, and advisory services, including setting up the franchisee's
- Inspection, testing, and other quality control programs
The Corporation 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 upon commencement of operations.
Source: Item 23 — RECEIPT (FDD pages 54–209)
What This Means (2025 FDD)
According to the 2025 Learningrx Franchise Disclosure Document, Learningrx accounts for pre-opening services as a single distinct performance obligation. This approach is based on the practical expedient for private company franchisors outlined in ASC 952-606, Franchisors—Revenue from Contracts with Customers.
The pre-opening services provided by Learningrx include assistance in selecting a site and obtaining facilities. This encompasses preparing the facilities for their intended use, including help with related financing, architectural, and engineering services, and lease negotiation.
Learningrx also provides training of the franchisee's personnel or the franchisee in the LearningRx processes and systems. Additionally, Learningrx offers preparation and distribution of manuals and similar material concerning operations, administration, and record keeping, as well as bookkeeping, information technology, and advisory services, including setting up the franchisee's systems. The pre-opening services also include inspection, testing, and other quality control programs. Learningrx has determined that the fair value of these pre-opening services exceeds the initial fees received; therefore, the initial fees are allocated to the pre-opening services, which are recognized as revenue upon commencement of operations.