How are transaction prices attributable to performance obligations recognized by Mr. Sandless?

According to Mr. Sandless's 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 Mr. Sandless follows established guidelines to ensure that revenue is recognized appropriately. The transaction price attributable to performance obligations are recognized as the performance obligations are satisfied. This indicates that revenue is recognized when Mr. Sandless has fulfilled its obligations to the customer.

For franchisees, this means that the revenue they generate from fulfilling their service obligations will be recognized as those services are completed. This approach aligns with standard accounting practices, ensuring that revenue is recorded in the period it is earned.

Furthermore, the FDD states that any portion of the franchise fee not directly linked to a distinct performance obligation is amortized over the life of the franchise agreement. Similarly, commissions paid for franchises are also amortized over the life of the franchise agreement. This amortization approach spreads the recognition of these revenues over the duration of the agreement, reflecting the ongoing benefit provided.

Mr. Sandless adopted ASC-606 and ASU 2021-02 using the modified retrospective method starting with January 1, 2020. This indicates that the company has updated its accounting practices to comply with the latest standards, which could impact how revenue is reported and recognized.