Under what accounting standards does My Salon Suite recognize revenue?
My_Salon_Suite Franchise · 2025 FDDAnswer from 2025 FDD Document
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).
Under ASC 606, substantially all of our revenue is recognized over time as we deliver services and support for our franchisees, except for revenues earned for the sale of goods, equipment, and certain services, of $4,094,384 and $4,388,257 in the years ended December 31, 2023 and 2022, respectively, which are recognized at a point in time and are included in other revenue on our consolidated statements of income.
Royalties are generally based on a percent of franchisee sales differing by brand ranging from 2% to 8% and are recognized at the time the underlying franchisee's sales occur.
To secure new franchises, the Company uses its sales force, and in certain instances, third party brokers to obtain leads for new franchise arrangements. The costs for internal sales commissions and third-party broker fees are amortized over the agreement term of each respective contract starting from the opening date of the franchise center.
Source: Item 6 — Other Intangibles and Goodwill (FDD pages 274–314)
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, which covers revenue from contracts with customers, and Topic 842, which addresses lease revenue. The adoption of ASC 842 was effective as of January 1, 2022.
My Salon Suite's revenue streams include franchise sales (initial and sub-franchise fees, resale transfer fees, and renewal fees), royalties based on a percentage of franchisee sales, salon suite rental income, and other revenue sources such as general contracting construction sales, and sales of equipment, services, supplies, and inventory. Royalties are generally based on a percentage of franchisee sales, ranging from 2% to 8%, and are recognized when the franchisee's sales occur.
Substantially all of My Salon Suite's revenue is recognized over time as they deliver services and support to their franchisees. However, revenues earned from the sale of goods, equipment, and certain services, amounting to $4,094,384 in 2023 and $4,388,257 in 2022, are recognized at a specific point in time. These revenues are included in other revenue on the consolidated statements of income. The company amortizes costs for internal sales commissions and third-party broker fees over the agreement term of each contract, starting from the franchise center's opening date.