According to Mr. Sandless' accounting policies, when are revenues recognized?
Mr_Sandless Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company records revenue in accordance Accounting Standards Board ("FASB") and Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606). The transaction price attributable to performance obligations are recognized as the performance obligations are satisfied. The portion of the franchise fee, if any, that is not attributable to a distinct performance obligation are amortized over the life of the related franchise agreements. Commission paid for franchises are amortized over the life of the franchise agreement. The company adopted ASC-606 and ASU 2021-02 using the modified retrospective method starting with January 1, 2020.
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 41–42)
What This Means (2025 FDD)
According to Mr. Sandless' 2025 Franchise Disclosure Document, the company adheres to specific accounting standards for revenue recognition. Mr. Sandless records revenue in accordance with Accounting Standards Board (FASB) and Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606). This means that the transaction price tied to performance obligations is recognized as those obligations are fulfilled.
For Mr. Sandless, this policy has specific implications for franchise fees and commissions. If any portion of the franchise fee is not directly attributable to a distinct performance obligation, it is amortized over the life of the franchise agreement. Similarly, commissions paid for franchises are also amortized over the life of the franchise agreement.
Furthermore, the FDD states that Mr. Sandless adopted ASC-606 and ASU 2021-02 using the modified retrospective method starting January 1, 2020. This indicates a shift in how revenue recognition was handled, aligning with updated accounting standards. For a potential franchisee, this means that the initial franchise fee paid to Mr. Sandless may not be recognized immediately as revenue by the company but will instead be recognized over the term of the franchise agreement. This approach is common in franchising to match the revenue with the ongoing services and support provided to the franchisee.