How does Carbones Pizzeria determine the contract price for revenue recognition?
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 determines the transaction price as part of its five-step revenue recognition process. This process involves identifying the contract with the customer, identifying the performance obligations within that contract, determining the transaction price, allocating the transaction price to the performance obligations, and finally, recognizing revenue as the performance obligations are satisfied.
For Carbones Pizzeria, revenue recognition varies depending on the revenue stream. Royalties are recognized weekly based on a percentage of reported franchisee sales. Initial and renewal franchise fees are recognized over the contractual term of the franchise agreement, which is typically 10 years. Revenue from company-owned restaurant sales is recognized at the time of the sale.
This multi-faceted approach to revenue recognition ensures that Carbones Pizzeria accurately accounts for income from various sources, aligning with standard accounting practices. Prospective franchisees should understand these revenue recognition policies, as they directly impact how the franchisor reports its financial performance and how royalties are calculated and paid.