What is Exit's process for determining the transaction price in a contract with a customer?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
In accordance with FASB Topic 606, Revenue from Contracts with Customers, or ASC 606, the Company recognizes revenue when a customer obtains control of promised goods or services, in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. To determine revenue recognition, the Company performs the following five steps:
- Identification of the contract, or contracts, with a customer
- Identification of the performance obligation(s) in the contract
- Determination of the transaction price
- Allocation of the transaction price to the performance obligation(s) in the contract
- Recognition of revenue when or as the Company satisfies the performance obligations
For contracts with multiple performance obligations, the Company allocates the contract's transaction price to each performance obligation based on the relative standalone selling price. The primary method used to estimate standalone selling price is the expected cost plus a margin approach, under which the Company forecasts their expected costs of satisfying a performance obligation and then add an appropriate margin for that distinct good or service based on margins for similar services sold on a standalone basis.
The Company primarily recognizes revenue from franchise and regional development fees, transaction fees, annual membership fees, software and training fees, convention income, and ancillary revenues.
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, the company recognizes revenue in accordance with FASB Topic 606, Revenue from Contracts with Customers, or ASC 606. Exit recognizes revenue when a customer obtains control of promised goods or services, in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. To determine revenue recognition, Exit performs five steps: identifying the contract, identifying performance obligations, determining the transaction price, allocating the transaction price to performance obligations, and recognizing revenue when the performance obligations are satisfied.
For contracts with multiple performance obligations, Exit allocates the contract's transaction price to each performance obligation based on the relative standalone selling price. The primary method used to estimate standalone selling price is the expected cost plus a margin approach, under which Exit forecasts their expected costs of satisfying a performance obligation and then add an appropriate margin for that distinct good or service based on margins for similar services sold on a standalone basis.
Exit primarily recognizes revenue from franchise and regional development fees, transaction fees, annual membership fees, software and training fees, convention income, and ancillary revenues. Transaction fees maximize at $2,700 per calendar year per Sales Representative. Transaction fees for all sales, rentals, referrals and partial transactions are applied toward the $2,700 maximized transaction fee limit.