Annual report [Section 13 and 15(d), not S-K Item 405]

Revenue Disclosures

v3.25.4
Revenue Disclosures
 12 Months Ended
Dec. 31, 2025
Revenue from Contract with Customer [Abstract]  
Revenue Disclosures Revenue Disclosures
Franchising Fees, Royalty Fees, Advertising Fund Revenue, and Software Fees
As of December 31, 2025, we had 885 franchised clinics in operation, 82 clinic licenses sold but not yet developed and 57 executed letters of intent for future clinic licenses. The franchise arrangement is documented in the form of a franchise agreement. The franchise arrangement requires us to perform various activities to support the brand that do not directly transfer goods and services to the franchisee, but instead represent a single performance obligation, which is the transfer of the franchise license. The intellectual property subject to the franchise license is symbolic intellectual property as it does not have significant standalone functionality, and substantially all of the utility is derived from its association with our past or ongoing activities. The nature of our promise in granting the franchise license is to provide the franchisee with access to the brand’s symbolic intellectual property over the term of the license. The services provided by us are highly interrelated with the franchise license and as such are considered to represent a single performance obligation.
The transaction price in a standard franchise arrangement primarily consists of (a) initial franchise fees, (b) continuing franchise fees (royalties), (c) advertising fees, and (d) software fees. The revenue accounting standard provides an exception for the recognition of sales-based royalties promised in exchange for a license (which otherwise requires a reporting entity to estimate the amount of variable consideration to which it will be entitled in the transaction price).
We recognize the primary components of the transaction price as follows:
•Initial and renewal franchise fees, as well as transfer fees, are recognized as revenue ratably on a straight-line basis over the term of the respective franchise agreement commencing with the execution of the franchise, renewal, or transfer agreement. As these fees are typically received in cash at or near the beginning of the contract term, the cash received is initially recorded as a contract liability until recognized as revenue over time.
•We are entitled to royalties and advertising fees based on a percentage of the franchisee’s gross sales as defined in the franchise agreement. Royalty and advertising revenue are recognized when the franchisee’s sales occur. Depending on timing within a fiscal period, the recognition of revenue results in either what is considered a contract asset (unbilled receivable) or, once billed, accounts receivable, on the consolidated balance sheets.
•We are entitled to a software fee, which is charged monthly. We recognize revenue related to software fees ratably on a straight-line basis over the term of the franchise agreement.
In determining the amount and timing of revenue from contracts with customers, we exercise significant judgment with respect to collectability of the amount; however, the timing of recognition does not require significant judgment as it is based on either the franchise term or the reported sales of the franchisee, neither of which requires estimation. We believe that our franchising arrangements do not contain a significant financing component.
We recognize advertising fees received under franchise agreements as advertising fund revenue.
Capitalized Sales Commissions
Sales commissions earned by the regional developers and our sales force are considered incremental and recoverable costs of obtaining a franchise agreement with a franchisee. These costs are deferred and then amortized as the respective franchise fees are recognized ratably on a straight-line basis over the term of the franchise agreement.
Disaggregation of Revenue
We believe that the captions contained on the consolidated income statements appropriately reflect the disaggregation of our revenue by major type for the years ended December 31, 2025 and 2024. Other revenues primarily consist of merchant income associated with preferred vendor royalties associated with franchisees’ credit card transactions.
The following table shows our revenues disaggregated according to the timing of transfer of services:
December 31,
2025 2024
Revenue recognized at a point in time $ 45,486,703  $ 43,478,254 
Revenue recognized over time 9,408,889  8,685,176 
Total revenue $ 54,895,592  $ 52,163,430 
Rollforward of Accounts Receivable
Changes in our accounts receivable, net during the years ended December 31, 2025 and 2024 were as follows:
Accounts Receivable, Net
Balance at December 31, 2023 $ 2,580,589 
Cash received against accounts receivable included at the beginning of the year (2,387,577)
Net increase during the year ended December 31, 2024 2,614,262 
Allowance for credit losses (220,893)
Balance at December 31, 2024 $ 2,586,381 
Cash received against accounts receivable included at the beginning of the year (2,067,962)
Net increase during the year ended December 31, 2025 2,760,932 
Allowance for credit losses (429,487)
Balance at December 31, 2025 $ 2,849,864 
Changes in our contract liability for deferred franchise fees during the years ended December 31, 2025 and 2024 were as follows:
Deferred Revenue
Short and Long-Term
Balance at December 31, 2023 $ 16,113,879 
Revenue recognized that was included in the contract liability at the beginning of the year (2,841,085)
Net increase during the year ended December 31, 2024 1,724,311 
Balance at December 31, 2024 $ 14,997,105 
Revenue recognized that was included in the contract liability at the beginning of the year (3,006,059)
Net increase during the year ended December 31, 2025 1,427,243 
Balance at December 31, 2025 $ 13,418,289 
Our deferred franchise and development costs represent capitalized sales commissions. Changes during the years ended December 31, 2025 and 2024 were as follows:
Deferred Franchise and Development Costs
Short and Long-Term
Balance at December 31, 2023 $ 6,251,366 
Recognized as cost of revenue during the year (1,221,140)
Net increase during the year ended December 31, 2024 539,247 
Balance at December 31, 2024 $ 5,569,473 
Recognized as cost of revenue during the year (1,190,555)
Net increase during the year ended December 31, 2025 394,144 
Balance at December 31, 2025 $ 4,773,062 
The following table illustrates revenues expected to be recognized in the future related to performance obligations that were unsatisfied (or partially unsatisfied) as of December 31, 2025. We have elected to exclude short term contracts, sales and usage-based royalties and any other variable consideration recognized on an “as invoiced” basis.
Contract liabilities expected to be recognized in: Amount
2026 $ 2,519,018 
2027 2,413,277 
2028 2,254,336 
2029 1,899,640 
2030 1,630,838 
Thereafter 2,701,180 
Total $ 13,418,289