Quarterly report [Sections 13 or 15(d)]

Summary of Significant Accounting Policies

v3.25.1
Summary of Significant Accounting Policies
3 Months Ended
Mar. 31, 2025
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

Note 3 – Summary of Significant Accounting Policies

Cash, cash equivalents and restricted cash The Company considers all highly liquid investments with an original maturity of 90 days or less to be cash equivalents. The Company's restricted cash consists of marketing fund restricted cash, which can only be used for activities that promote the Company’s brands and guarantee of standby letter of credit (See Note 15). The interest earned on marketing fund restricted cash accounts is also restricted for use. Restricted cash was $15,987 and $16,063 at March 31, 2025 and December 31, 2024, respectively.

Accounts receivable and allowance for expected credit losses – Accounts receivable primarily consist of amounts due from franchisees and vendors. These receivables primarily relate to royalties, advertising contributions, equipment and product sales, training, vendor commissions and other miscellaneous charges. The Company’s payment terms on its receivables from franchisees are generally 30 days. Receivables are unsecured; however, the franchise agreements provide the Company the right to withdraw funds from the franchisee’s bank account or to terminate the franchise for nonpayment.

The Company’s accounts and notes receivable are recorded at net realizable value, which includes an appropriate allowance for expected credit losses. On a periodic basis, the Company evaluates its accounts and notes receivable balances and establishes an allowance for expected credit losses. The estimate of expected credit losses is based upon historical bad debts, current receivable balances, age of receivable balances, the franchisee's or customer’s financial condition and ability to comply with credit terms and current economic trends, all of which are subject to change. Actual uncollected amounts have historically been consistent with the Company’s expectations. Account balances are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

The following table provides a reconciliation of the activity related to the Company’s accounts receivable and notes receivable allowance for credit losses:

 

 

 

Accounts receivable

 

 

Notes receivable

 

 

Total

 

Balance at December 31, 2024

 

$

2,510

 

 

$

205

 

 

$

2,715

 

Bad debt expense (recovery) recognized during the year

 

 

250

 

 

 

(1

)

 

 

249

 

Write-off of uncollectible amounts

 

 

(1,519

)

 

 

(122

)

 

 

(1,641

)

Balance at March 31, 2025

 

$

1,241

 

 

$

82

 

 

$

1,323

 

Comprehensive income – The Company does not have any components of other comprehensive income recorded within the consolidated financial statements and therefore does not separately present a consolidated statement of comprehensive income in the condensed consolidated financial statements.

Fair value measurements – Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures, applies to all financial assets and financial liabilities that are measured and reported on a fair value basis and requires disclosure that establishes a framework for measuring fair value and expands disclosure about fair value measurements. ASC Topic 820 establishes a valuation hierarchy for disclosures of the inputs to valuations used to measure fair value.

This hierarchy prioritizes the inputs into three broad levels as follows:

Level 1 – Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that can be accessed at the measurement date.

Level 2 – Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates and yield curves), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

Level 3 – Unobservable inputs that reflect assumptions about what market participants would use in pricing the asset or liability. These inputs would be based on the best information available, including the Company’s own data.

The Company’s financial instruments include cash and cash equivalents, restricted cash, accounts receivable, notes receivable, accounts payable, accrued expenses, notes payable and other current liabilities. The carrying amounts of these financial instruments approximate fair value due to their short maturities, proximity of issuance to the balance sheet date or variable interest rate.

Recently adopted accounting pronouncements

Segment Reporting – In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” ASU 2023-07 improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The adoption of this accounting standard did not have an impact on the Company's condensed consolidated financial statements. See Note 17 for additional information.

Recently issued accounting pronouncements

The Company qualifies as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and will lose this qualification on December 31, 2026, which is the last day of the fiscal year after the fifth anniversary of the Company's IPO, or sooner. An emerging growth company may take advantage of reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. As an emerging growth company, the JOBS Act permits the Company an extended transition period for complying with new or revised accounting standards affecting public companies. The Company has elected to use this extended transition period.

Income Taxes Disclosures – In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 for public business entities (“PBEs”) and December 15, 2025 for entities other than PBEs with early adoption permitted. The Company is currently evaluating the impact of this guidance on its condensed consolidated financial statements.

Income Statement Expense Disclosures – In November 2024, the FASB issued ASU No. 2024-03, “Income Statement (Subtopic 220-40): Disaggregation of Income Statement Expenses.” ASU 2024-03 requires disaggregated information about specified categories of expenses included in certain captions presented on the face of the income statement including purchases of inventory, employee compensation, depreciation, amortization, and depletion. ASU 2024-03 is effective for public entities with annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

Supplemental balance sheet information

 

 

 

March 31,

 

 

December 31,

 

 

 

2025

 

 

2024

 

Prepaid expenses and other current assets

 

 

 

 

 

 

Prepaid expenses and other

 

$

7,056

 

 

$

2,210

 

Tax receivables

 

 

2,472

 

 

 

2,659

 

Gift card receivable

 

 

5,199

 

 

 

5,809

 

Total prepaid expenses and other current assets

 

$

14,727

 

 

$

10,678

 

 

 

 

 

 

 

 

 

Accrued expenses

 

 

 

 

 

 

Accrued compensation

 

$

2,859

 

 

$

1,914

 

Contingent consideration from acquisitions, current portion

 

 

561

 

 

 

581

 

Sales tax accruals

 

 

977

 

 

 

1,197

 

Legal accruals

 

 

28,729

 

 

 

13,835

 

Other accruals

 

 

13,476

 

 

 

13,796

 

Total accrued expenses

 

$

46,602

 

 

$

31,323

 

 

 

 

 

 

 

 

 

Other current liabilities

 

 

 

 

 

 

Lease liabilities, short-term

 

$

5,593

 

 

$

5,276

 

Promissory note

 

 

3,409

 

 

 

3,350

 

Tax receivable agreement liability, current portion

 

 

2,090

 

 

 

2,090

 

Gift card liability

 

 

5,199

 

 

 

5,809

 

Other current liabilities

 

 

1,812

 

 

 

1,719

 

Total other current liabilities

 

$

18,103

 

 

$

18,244