What are the five steps Cicis uses to recognize revenue from contracts with customers?
Cicis Franchise · 2025 FDDAnswer from 2025 FDD Document
isposed of are determined in a similar manner, except that fair values are reduced for the cost to dispose. There were no such impairment losses recognized for the years ended December 31, 2024 and 2023.
Revenue recognition: The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which provides a five-step model for recognizing revenue from contracts with customers as follows:
- Identify the contract with a customer
- Identify the performance obli
Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 58–64)
What This Means (2025 FDD)
According to Cicis's 2025 Franchise Disclosure Document, the company adheres to ASC Topic 606, which outlines the guidelines for recognizing revenue from contracts with customers. This standard provides a structured, five-step model. These steps are crucial for Cicis to accurately report its financial performance and position.
The five steps Cicis uses to recognize revenue are: (1) Identify the contract with a customer, which involves determining the agreement's terms and conditions. (2) Identify the performance obligations in the contract, which means pinpointing what Cicis is obligated to provide to the customer. (3) Determine the transaction price, which is the amount Cicis expects to receive in exchange for the goods or services. (4) Allocate the transaction price to the performance obligations in the contract, which involves distributing the total price across each specific obligation. (5) Recognize revenue when or as performance obligations are satisfied, meaning Cicis records revenue as it fulfills its commitments to the customer.
For a prospective Cicis franchisee, understanding these revenue recognition principles is important because it provides insight into how Cicis accounts for various fees and royalties. For example, initial and renewal franchise fees are recognized as revenue on a straight-line basis over the agreement term, while continuing royalties are recognized as franchised restaurant sales occur. This information can help franchisees better understand the financial relationship between themselves and Cicis.