What accounting standards does My Salon Suite use for revenue recognition?
My_Salon_Suite Franchise · 2025 FDDAnswer from 2025 FDD Document
are typically collected upon agreement execution and prior to the start of the Company's performance obligations.
The Company recognizes revenue in accordance with FASB ASC Topic 606 (which addresses revenue from contracts with customers) and Topic 842 (which addresses lease revenue with the adoption of ASC 842 as of January 1, 2022).
The Company has defined its distinct and non-distinct performance obligations required under the terms of the various contracts. For its franchise agreements, the Company believes that portions of certain Pre-Opening Services; the initial training, site selection and development services, benefit the Franchisee without its use of the license and are therefore considered distinct performance obligations separable from the franchise right. Performance obligations for initial training, site selection and development services are generally satisfied as of the opening date for a franchise center.
Source: Item 17 — (r) of the FDD and Section 13 of the Franchise Agreement disclose the existence of certain covenants restricting competition to which Franchisee must agree. The Commissioner has held that covenants restricting competition contrary to Section 9-08-06 of the North Dakota Century Code, without further disclosing that such covenants may be subject to this statue, are unfair, unjust, or inequitable within the intent of Section 51-19-09 of the North Dakota Franchise Investment Law. The FDD and the Franchise Agreement are amended accordingly to the extent required by law. (FDD pages 230–274)
What This Means (2025 FDD)
According to My Salon Suite's 2025 Franchise Disclosure Document, the company recognizes revenue in accordance with FASB ASC Topic 606 and Topic 842. Topic 606 addresses revenue from contracts with customers, while Topic 842 addresses lease revenue, with the adoption of ASC 842 as of January 1, 2022.
My Salon Suite's revenues consist of several streams, including initial franchise fees, franchise re-sale transfer fees, renewal franchise fees, royalties based on a percentage of franchisee sales, salon suite rental income, and other revenue from sales of equipment, services, supplies, and inventory. Some franchises involve master franchise arrangements that include development rights across defined territories. The agreements governing the franchise relationship typically range from 10 to 20 years. Initial franchise and transfer fees are generally collected upon agreement execution before My Salon Suite begins fulfilling its performance obligations.
For a prospective franchisee, this means that My Salon Suite adheres to specific and well-defined accounting standards for recognizing revenue, which can provide a level of assurance regarding the company's financial reporting. Understanding these standards and revenue streams can help franchisees better interpret the financial performance of My Salon Suite and assess the potential return on investment. It is important for potential franchisees to consult with financial advisors to fully understand the implications of these accounting standards on their investment.