How does 1 800 Packouts classify freight billed to customers for accounting purposes?

According to 1 800 Packouts's 2025 Franchise Disclosure Document, the company has specific accounting practices for freight billed to customers. 1 800 Packouts classifies the freight billed to customers as sales revenue. This means that when a franchisee bills a customer for the cost of shipping or handling, that amount is recorded as part of the company's total sales.

However, the FDD also states that the related freight costs are classified as cost of sales. This means that the direct expenses 1 800 Packouts incurs for shipping are considered an expense. This is a common accounting practice where the revenue from shipping is offset by the expense of providing that shipping.

Understanding this classification is important for prospective franchisees as it affects how their revenue and expenses are reported, which ultimately impacts their profitability calculations and financial statements. Franchisees should ensure they understand these accounting classifications to accurately manage their business finances and meet reporting requirements.