How is the transaction price determined for Browns Chicken?
Browns_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
mbined performance obligation. The Organization has elected to account for shipping and handling activities as a fulfillment cost as permitted by the standard.
3. Determine the transaction price
The transaction price is determined based on the consideration to which the Organization will be entitled in exchange for transferring products or services to the customer. To the extent the transaction price is variable, determining the transaction price may require significant judgment. revenue is recognized at an amount equal to the consideration to which the Organization expects to be entitled. This estimate includes customer sales incentives which are accounted for as a reduction to revenue and estimated primarily using the expected value method.
The Organization does not offer extended payment terms to customers or other financing arrangements related to accounts receivable.
4. Allocate the transaction price to performance obligations in the contract
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price basis unless a portion of the variable consideration related to the contract is allocated entirely to a performance obligation. The Organization determines standalone selling price based on the price at which the performance obligation is sold separately.
- Recognize revenue when or as the Organization satisfies a performance obligation The Organization generally satisfies performance obligations at a point in time. Revenue is recognized based on the transaction price at the time the related performance obligation is satisfied by transferring a promised product or service to a customer. The impact to revenue related to prior period performance obligations in the twelve months ended December 31, 2024 is immaterial.
NOTE 3 - REVENUE FROM CONTRACTS WITH CUSTOMERS - Continued
COSTS TO OBTAIN OR FULFILL A CONTRACT
The Organization does not incur costs to obtain a contract since contracts are established at the point of sale. Incidental items that are immaterial in the context of the contract are recognized as expense as incurred. The Organization has elected to recognize any costs incurred for transportation of products to customers as a component of
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 42)
What This Means (2025 FDD)
According to Browns Chicken's 2025 Franchise Disclosure Document, the transaction price is based on the consideration Browns Chicken will receive in exchange for providing products or services to customers. If the transaction price varies, determining the final price may require significant judgment. Browns Chicken recognizes revenue based on the consideration they expect to receive, including deductions for customer sales incentives, which are estimated using the expected value method.
For Browns Chicken, if a contract involves a single performance obligation, the entire transaction price is allocated to that obligation. However, if there are multiple performance obligations, the transaction price is allocated to each based on their relative standalone selling prices, unless a portion of the variable consideration is specifically related to one performance obligation. Browns Chicken determines these standalone selling prices based on what each performance obligation would be sold for separately.
Browns Chicken generally recognizes revenue when they fulfill their performance obligations at a specific point in time. Revenue is recognized based on the transaction price when the promised product or service is transferred to the customer. The document specifies that the impact on revenue related to prior period performance obligations was immaterial for the year ending December 31, 2024.
Browns Chicken does not incur costs to obtain contracts, as contracts are established at the point of sale. Costs for transporting products to customers are included as part of the cost of goods sold. The organization incurred bad debt expense of $14,854 and $0 for December 31, 2024 and December 31, 2023 respectively.