What are the five steps in the revenue model that Benjamin Franklin Plumbing uses to recognize revenue?
Benjamin_Franklin_Plumbing Franchise · 2025 FDDAnswer from 2025 FDD Document
Revenue is recognized in accordance with Accounting Standards Codification ("ASC") 606 - Revenue from Contracts with Customers, using a five-step revenue model, as follows: identifying the contract with the customer; identifying the performance obligations in the contract; determining the transaction price; allocating the transaction price to the performance obligations; and recognizing revenue when (or as) the entity satisfies a performance obligation.
Source: Item 22 — CONTRACTS (FDD pages 87–88)
What This Means (2025 FDD)
According to Benjamin Franklin Plumbing's 2025 Franchise Disclosure Document, the company adheres to Accounting Standards Codification (ASC) 606 for revenue recognition. This standard outlines a five-step model for recognizing revenue from contracts with customers.
The five steps are: first, identifying the contract with the customer; second, identifying the performance obligations within that contract; third, determining the transaction price; fourth, allocating the transaction price to each of the performance obligations; and fifth, recognizing revenue as each performance obligation is satisfied.
For a Benjamin Franklin Plumbing franchisee, understanding these steps is crucial for accurate financial reporting and compliance. The most important aspect is to correctly identify and allocate revenue to each performance obligation, as this determines when revenue can be officially recognized. This model applies to various revenue streams, including royalties, advertising fees, and fees for services like software and call centers.