What was the amount of share-based compensation expense for My Salon Suite in 2024?
My_Salon_Suite Franchise · 2025 FDDAnswer from 2025 FDD Document
8,040 | | Gain on sale of assets | 19,157 | - | | Other expense | (27,188 ) | - | | | | | | Total other income, net | 236,645 | 72,208 | | | | | | Income before taxes | 18,589,396 | 21,512,079 | | | | | | Income tax expense | 8,921,146 | 8,942,992 | | | | | | Net income | $ 9,668,250 | $ 12,569,087 |
Consolidated Statements of Changes in Member's Equity
| Shares | Common Stock Amount | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total | |
|---|---|---|---|---|---|---|
| Balance at December 31, 2022 | 1,000 | $ 1,000 | $ 315,400,882 | $ 57,389,683 $ | - $ 372,791,565 | |
| Parent Company transactions - net | - | - | (18,947,698) | - | - | (18,947,698) |
| Share-based compensation | - | - | 1,144,951 | - | - | 1,144,951 |
| Net income | - | - | - | 12,569,087 | - | 12,569,087 |
| Balance at December 31, 2023 | 1,000 | $ 1,000 | $ 297,598,135 | $ 69,958,770 $ | - | $ 367,557,905 |
| Parent Company transactions - net |
Source: Item 17 — (r) of the FDD and Section 13 of the Franchise Agreement disclose the existence of certain covenants restricting competition to which Franchisee must agree. The Commissioner has held that covenants restricting competition contrary to Section 9-08-06 of the North Dakota Century Code, without further disclosing that such covenants may be subject to this statue, are unfair, unjust, or inequitable within the intent of Section 51-19-09 of the North Dakota Franchise Investment Law. The FDD and the Franchise Agreement are amended accordingly to the extent required by law. (FDD pages 230–274)
What This Means (2025 FDD)
According to My Salon Suite's 2025 Franchise Disclosure Document, the share-based compensation expense for the year ending December 31, 2024, was $1,240,361. This figure represents the expense recognized by My Salon Suite for equity-based compensation, which includes stock options granted to employees. The company recognizes these expenses based on the estimated fair values over the service period, typically the vesting period of the awards.
For a prospective franchisee, understanding share-based compensation is not directly relevant to their investment in a franchise. This expense is an internal accounting matter for My Salon Suite, reflecting how they compensate their employees with equity. However, it is part of the overall financial picture of the company, which can be an indicator of the company's financial health and management practices.
The valuation of share-based compensation involves several estimates, including stock option forfeitures, the fair value of stock option awards using the Black-Scholes option valuation model, the expected life of each award, expected volatility based on historical data of similar entities, and the risk-free interest rate. These estimates can impact the reported compensation expense, and changes in these estimates can lead to adjustments in future periods.
Franchisees should focus on revenue, expenses, and profit margins of the franchise system as a whole, as well as their own potential revenue and expenses. While share-based compensation is an expense that affects the company's overall profitability, it does not directly impact the franchisee's day-to-day operations or financial performance.