When does Stretch Zone recognize revenue earned from grand opening services provided to franchisees?

According to Stretch Zone's 2025 Franchise Disclosure Document, the company provides grand opening services to franchisees, which include training, an on-site Master Practitioner, travel and related expenses for personnel supporting the first week of operations, and advertising and marketing support. Stretch Zone recognizes the revenue from these services upon the opening of the location and after completing the services. Until the revenue is earned, it is classified as unearned grand opening revenue and included in deferred revenue. This means that Stretch Zone does not recognize the revenue until the services are fully provided and the location is open for business.

For a prospective franchisee, this means that the fees paid for grand opening services are not immediately recognized as revenue by Stretch Zone. Instead, these fees are held as deferred revenue until the opening of the franchise location. This accounting practice ensures that revenue recognition aligns with the actual delivery of services and the commencement of operations at the new location.

This approach is fairly standard in the franchise industry, where initial fees often cover a range of pre-opening services and support. By deferring revenue recognition, Stretch Zone ensures that its financial reporting accurately reflects the value provided to franchisees over time, rather than recognizing all fees upfront. This can provide a more transparent view of the company's financial performance and its ongoing commitment to supporting new franchise locations.