# ASC 606-952-55: Revenue from Contracts with Customers — Franchisors — 55 Implementation Guidance and Illustrations Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/606/952/#55-implementation-guidance-and-illustrations) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-09T23:18:49.155Z to 2026-09-09T23:18:49.155Z Record version: sha256:f15c45499b814fa5281ba26136e48b1ba0f85b93723c68229fc68928a7e06497 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 606-952-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/606/952/#55-implementation-guidance-and-illustrations) SEC content: no #### Illustrations ##### [606-952-55-1](https://asc.understandingaccounting.org/asc/606/952/#606-952-55-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:49.155Z to 2026-09-09T23:18:49.155Z Record version: sha256:891a135b0088635c2d85310361787d93693501de0d6d0de58a2cf1f88f1233c0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity enters into a [contract](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") with a [customer](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") and promises to grant a franchise license to open a restaurant location. The franchise license term is 10 years. In addition to the license, the entity also promises to provide two services related to the opening of the franchise location—site selection and training. The entity receives a fixed fee of $25,000, as well as a sales-based royalty of 5 percent of the customer's sales for the term of the license. The fixed consideration of $25,000 is payable on or before the opening of the restaurant location. ##### [606-952-55-2](https://asc.understandingaccounting.org/asc/606/952/#606-952-55-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:49.155Z to 2026-09-09T23:18:49.155Z Record version: sha256:0860a12d63ca6e901fb162839954fdd53180677e076f7f2a78332cc92a60f352 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity first assesses whether it is eligible for the practical expedient for identifying [performance obligations](https://asc.understandingaccounting.org/glossary/p/#performance-obligation "A promise in a contract with a customer to transfer to the customer either: A good or service (or a bundle of goods or services) that is distinct A series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.") in paragraph [952-606-25-2](https://asc.understandingaccounting.org/asc/606/952/#606-952-25-2). The entity determines that it is eligible because it is not a [public business entity](https://asc.understandingaccounting.org/glossary/p/#public-business-entity "A public business entity is a business entity meeting any one of the criteria below. Neither a not-for-profit entity nor an employee benefit plan is a business entity. It is required by the U.S. Securities and Exchange Commission (SEC) to file or furnish financial statements, or does file or furnish financial statements (including voluntary filers), with the SEC (including other entities whose financial statements or financial information are required to be or are included in a filing). It is required by the Securities Exchange Act of 1934 (the Act), as amended, or rules or regulations promulgated under the Act, to file or furnish financial statements with a regulatory agency other than the SEC. It is required to file or furnish financial statements with a foreign or domestic regulatory agency in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer. It has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market. It has one or more securities that are not subject to contractual restrictions on transfer, and it is required by law, contract, or regulation to prepare U.S. GAAP financial statements (including notes) and make them publicly available on a periodic basis (for example, interim or annual periods). An entity must meet both of these conditions to meet this criterion. An entity may meet the definition of a public business entity solely because its financial statements or financial information is included in another entity's filing with the SEC. In that case, the entity is only a public business entity for purposes of financial statements that are filed or furnished with the SEC."), it is a [franchisor](https://asc.understandingaccounting.org/glossary/f/#franchisor "The party who grants business rights (the franchise) to the party (the franchisee) who will operate the franchised business.") that is within the scope of Topic 952, and it has entered into a franchise agreement with a customer. ##### [606-952-55-3](https://asc.understandingaccounting.org/asc/606/952/#606-952-55-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:49.155Z to 2026-09-09T23:18:49.155Z Record version: sha256:091a0ef493da4287da95ae350992feed2a19d1c3b993d57b4d61ff40ee5ac121 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In applying the practical expedient, the entity compares its pre-opening services (training and site selection) to the list of services in paragraph [952-606-25-2](https://asc.understandingaccounting.org/asc/606/952/#606-952-25-2) instead of applying the guidance in paragraph [606-10-25-19](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-19). The entity determines that those services may be accounted for as distinct from the franchise license because they are consistent with the list of services in paragraph [952-606-25-2](https://asc.understandingaccounting.org/asc/606/952/#606-952-25-2). The entity makes an accounting policy election to account for all pre-opening services that are consistent with the list in paragraph [952-606-25-2](https://asc.understandingaccounting.org/asc/606/952/#606-952-25-2) as a single performance obligation. Therefore, the entity determines that it has two performance obligations—a franchise license and pre-opening services. ##### [606-952-55-4](https://asc.understandingaccounting.org/asc/606/952/#606-952-55-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:49.155Z to 2026-09-09T23:18:49.155Z Record version: sha256:26c3940f1d0680bc5b378a1d202464d3921fe7910792f3234f96b5ed396fbb32 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity then applies the guidance in paragraphs [606-10-32-28 through 32-45](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-28) to allocate the transaction price to the performance obligations and the guidance in paragraphs [606-10-25-23 through 25-37](https://asc.understandingaccounting.org/asc/606/10/#606-10-25-23) and [606-10-55-65 through 55-65B](https://asc.understandingaccounting.org/asc/606/10/#606-10-55-65) to determine when and how to recognize revenue for satisfaction of the performance obligations. ##### [606-952-55-5](https://asc.understandingaccounting.org/asc/606/952/#606-952-55-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:18:49.155Z to 2026-09-09T23:18:49.155Z Record version: sha256:ad2ec7c517a7537870fd7c613acdf6c7be40a4a8746615aab6dca565d6da1fe5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity discloses its use of the practical expedient and its accounting policy election to treat the pre-opening services as a single performance obligation in accordance with the disclosure requirements in paragraphs [952-606-50-1 through 50-2](https://asc.understandingaccounting.org/asc/606/952/#606-952-50-1) .