What does Aunt Millies Bakeries do with revenue from contracts with IOs to sell them territories?

According to Aunt Millies Bakeries' 2025 Franchise Disclosure Document, the company recognizes revenue when control of promised goods are transferred to customers. This recognition occurs in an amount that reflects the transaction price consideration that Aunt Millies Bakeries expects to receive in exchange for those goods. This policy aligns with Accounting Standards Codification Topic 606, Revenues from Contracts with Customers (ASC 606), which Aunt Millies Bakeries adopted on October 1, 2020.

In simpler terms, Aunt Millies Bakeries accounts for revenue when it delivers its baked goods to customers, recording the income at the price it anticipates receiving for those goods. This is a standard accounting practice ensuring that revenue is recognized when it is earned and realized.

However, the FDD excerpt does not specifically detail how Aunt Millies Bakeries handles revenue from contracts with Independent Operators (IOs) for selling them territories. The excerpt focuses on general revenue recognition policies related to product sales rather than the specific financial transactions related to territory sales to IOs. A prospective franchisee should seek clarification from Aunt Millies Bakeries regarding the accounting treatment of revenue generated from these territory sales, including when and how this revenue is recognized.