On what basis of accounting does All Team maintain its books and prepare its financial statements?
All_Team Franchise · 2025 FDDAnswer from 2025 FDD Document
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Company maintains its books and prepares its financial statements on the accrual basis of accounting wherein revenue is recognized when earned and invoiced and expenses are recognized when incurred. Furthermore, initial franchise fee income is earned upon execution of the franchise agreement, which is nonrefundable. The Company receives royalties based upon a percentage of annual sales volume of its affiliates and franchisees. Additionally, funding and processing fees are based on a percentage of gross billings.
In 2019, the Company adopted ASC 606, Revenue from Contracts with Customers, which amended the existing accounting standards for revenue recognition. Consequently, the Company recognizes revenue when the services are provided, persuasive evidence of an arrangement exists, the price is fixed and collection is reasonably assured in accordance with ASC 606.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 33)
What This Means (2025 FDD)
According to All Team's 2025 Franchise Disclosure Document, the company uses the accrual basis of accounting. This means that All Team recognizes revenue when it is earned and invoiced, and expenses are recognized when they are incurred, regardless of when cash changes hands.
For a prospective All Team franchisee, this is important because it dictates how the franchisor's financial performance is measured and reported. The accrual method provides a more accurate picture of All Team's profitability over time compared to the cash basis method, which only recognizes revenue and expenses when cash is received or paid out. This can help franchisees better understand the financial health and stability of the All Team franchise system.
Furthermore, the FDD states that initial franchise fee income is earned upon the execution of the franchise agreement, which is nonrefundable. All Team also receives royalties based on a percentage of the annual sales volume of its affiliates and franchisees, and funding and processing fees are based on a percentage of gross billings. These revenue streams are recognized according to ASC 606, which means revenue is recognized when services are provided, there is evidence of an arrangement, the price is fixed, and collection is reasonably assured.