How does Carbones Pizzeria allocate the transaction price to the performance obligations in a customer contract?
Carbones_Pizzeria Franchise · 2025 FDDAnswer from 2025 FDD Document
Revenue from contracts with customers is recognized using the following five steps:
- Identify the contract(s) with a customer;
- Identity the performance obligations in the contract;
- Determine the transaction price;
- Allocate the transaction price to the performance obligations in the contract; and
- Recognize revenue when (or as) the Company satisfies a performance obligation.
Source: Item 22 — CONTRACTS (FDD page 30)
What This Means (2025 FDD)
According to Carbones Pizzeria's 2025 Franchise Disclosure Document, the company uses a five-step process to recognize revenue from contracts with customers. The fourth step involves allocating the transaction price to the performance obligations in the contract.
Specifically, Carbones Pizzeria assesses the products or services promised in contracts with customers at the start of the contract to determine the appropriate amount to record as revenue, which is referred to as a performance obligation. Revenue is recognized when control of the promised products or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for the products or services.
This means that Carbones Pizzeria carefully identifies what they are promising to deliver to the customer (the performance obligations) and then determines how much of the total price should be allocated to each of those promises. Revenue is then recognized as each of those obligations is fulfilled.