How does Alloy treat shipping and handling costs related to retail sales in its financial statements?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
Revenues from retail sales are recognized when control of the promised goods is transferred to the customer. The Company has elected to treat shipping and handling as fulfillment activities and not a separate performance obligation. Accordingly, the Company recognizes revenue from retail sales as a single performance obligation at the point of sale or at the time of shipment, which is when transfer of control to the franchisee occurs. Shipping and handling costs are included in "Cost of goods sold" in the accompanying statements of operations and members' deficit.
Source: Item 23 — RECEIPTS (FDD pages 69–245)
What This Means (2025 FDD)
According to Alloy's 2025 Franchise Disclosure Document, the company considers shipping and handling for retail sales as part of the fulfillment activities rather than a separate performance obligation. This means Alloy recognizes revenue from retail sales as a single performance obligation. Revenue recognition occurs either at the point of sale or when the goods are shipped, marking the transfer of control to the franchisee.
For accounting purposes, Alloy includes shipping and handling costs within "Cost of goods sold" in their financial statements. This approach simplifies revenue recognition, as it combines the product sale and its delivery into one event for revenue recognition.
For a prospective Alloy franchisee, this means that the cost of shipping and handling will impact the cost of goods sold, which ultimately affects the gross profit margin. Understanding how these costs are categorized is important for managing the financial performance of the franchise and interpreting Alloy's financial statements.