What accounting standards does Mr. Sandless use to record revenue?
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's 2025 Franchise Disclosure Document, the company records revenue in accordance with the Accounting Standards Board (FASB) and Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606). This means that Mr. Sandless recognizes revenue when it satisfies its performance obligations under a contract with a customer.
For Mr. Sandless franchisees, this is particularly relevant regarding how franchise fees and commissions are treated. The portion of the franchise fee that is not attributable to a distinct performance obligation is amortized over the life of the related franchise agreements. Similarly, commissions paid for franchises are also amortized over the life of the franchise agreement.
Mr. Sandless adopted ASC-606 and ASU 2021-02 using the modified retrospective method starting January 1, 2020. This indicates a significant update in their accounting practices to align with current standards, which could affect how financial performance is reported and interpreted. Franchisees should understand these accounting principles to accurately assess their financial performance and compare it against Mr. Sandless's financial statements.