How does Aunt Millies Bakeries use scan-based trading (SBT) technology?
Aunt_Millies_Bakeries Franchise · 2025 FDDAnswer from 2025 FDD Document
a term shorter than 12-months.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue Recognition: The Company adopted Accounting Standards Codification Topic 606, Revenues from Contracts with Customers (ASC 606) on October 1, 2020. In accordance with ASC 606, revenue is recognized when control of the promised goods are transferred to customers, in an amount that reflects the transaction price consideration that the Company expects to receive in exchange for those goods.
The Company's industry has used scan-based trading (SBT) technology over several years to share information between the supplier and retailer. An extension of this technology allows the retailer to pay the supplier for product actually purchased by consumers as determined by the retailer's scan system rather than based on the product actually delivered to the retailer. These scan-based trade arrangements result in the Company carrying an inventory at the retailer's location, as well as entering into a shrink share arrangement with the retailer. Control of the inventory does not transfer upon delivery to the retailer because the company controls the risks and rights until the product is scanned at the reseller's register. Consequently, revenue on scan-based trading is not recognized until the product is purchased by the consumer. The Company has concluded that we are the principal.
The Company's production facilities deliver products to independent drivers ("IO" or "IOS"), who sell and deliver those products to outlets of retail accounts that are within the IOs' defined geographic territory. The IOs sell products using either SBT technology, authorized charge tickets, or cash sales. The Company recognizes deferred revenue from contracts with IOs to sell them territories they are covering. The Company defers the gain on the sale of the life of the corresponding note receivable from the IO. See Indep
Source: Item 23 — RECEIPT (FDD pages 44–196)
What This Means (2025 FDD)
According to Aunt Millies Bakeries' 2025 Franchise Disclosure Document, the company utilizes scan-based trading (SBT) technology, a common practice in the industry, to facilitate information sharing between the supplier and the retailer. This technology allows retailers to pay Aunt Millies Bakeries for products actually purchased by consumers, as determined by the retailer's scanning systems, rather than based on the quantity of product initially delivered to the retailer. This arrangement means that Aunt Millies Bakeries carries the inventory risk even when the product is located at the retailer's location and often involves a shrink share arrangement with the retailer.
Under the SBT system, Aunt Millies Bakeries retains control of the inventory until it is scanned at the reseller's register, meaning revenue is only recognized when the consumer purchases the product. The FDD indicates that Aunt Millies Bakeries considers itself the principal in these transactions. The company's production facilities deliver products to independent drivers (IOs), who then sell and deliver those products to retail outlets within their assigned territories. These IOs use SBT technology, authorized charge tickets, or cash sales to sell the products.
In fiscal years 2024 and 2023, Aunt Millies Bakeries recorded approximately $265,000,000 and $263,000,000, respectively, in sales through SBT. The company also recorded deferred revenue of approximately $2,098,000 and $1,400,000 as of September 30, 2024 and 2023, respectively. This deferred revenue recognition is a direct result of the SBT system, where revenue is recognized upon consumer purchase rather than delivery to the retailer. For sales not under the SBT arrangement, Aunt Millies Bakeries recognizes revenue at the time of delivery to the retailer, when the title and risk of loss transfer to the customer.