What accounting policy election is City Wide applying regarding amounts collected from customers on behalf of third parties, such as sales taxes, and how does this affect the presentation of revenue?

According to City Wide's 2025 Franchise Disclosure Document, the company has elected a specific accounting policy regarding amounts collected from customers on behalf of third parties, such as sales taxes. This policy allows City Wide to exclude these amounts from its reported revenue. As a result, the revenue presented in City Wide's financial statements is shown net of sales taxes and other similar revenue-based taxes. This means that the reported revenue figure reflects only the amounts City Wide actually retains, rather than the gross amount collected from customers.

For a prospective City Wide franchisee, this accounting policy election means that the revenue figures presented in the financial statements will not include sales taxes or similar taxes collected on behalf of governmental entities. This can provide a clearer picture of the company's actual earnings from its services, as these taxes are simply pass-through amounts. Franchisees should be aware that their own accounting practices will need to align with this policy to ensure consistency in financial reporting within the City Wide franchise system.

This accounting practice is fairly common, as it provides a more accurate representation of a company's actual revenue. By presenting revenue net of sales taxes, City Wide avoids inflating its revenue figures with amounts that are ultimately remitted to taxing authorities. This approach allows for a more transparent and meaningful analysis of the company's financial performance.