For Exit, were the advances to and from shareholders interest-bearing for the year ended December 31, 2023?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
at December 31, 2022 and was paid in full during the year ended December 31, 2022.
Upper Midwest Realty, Inc. d.b.a. Exit Realty Upper Midwest 25 Notes to Financial Statements (continued) December 31, 2024, 2023, and 2022
NOTE 9 – RETIREMENT PLAN
The SEP is a defined contribution plan in which the Company may make discretionary contributions directly into eligible employees' individual retirement accounts. Such contributions cannot exceed annual prescribed limits and are tax-deferred to the employee. Total Company contributions for the years ended December 31, 2024, 2023, and 2022 were $5,050, $8,500, and $24,000, respectively.
NOTE 10 – CONCENTRATIONS
The Compa
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, advances to and from shareholders were non-interest bearing for the year ended December 31, 2023. However, this changed effective for the year ended December 31, 2024, when Exit began imputing interest based on a blended annual federal rate of 5.03%.
For prospective Exit franchisees, this detail is relevant because it provides insight into the company's financial practices and its relationships with shareholders. The fact that advances were initially non-interest bearing suggests a certain level of financial flexibility or perhaps a close relationship between the company and its shareholders. The shift to imputing interest in 2024 could indicate a move towards more formalized financial practices or a change in the company's financial strategy.
The interest accrued during the year ended December 31, 2024, totaled $714, which was then capitalized and added to the principal balance of the note. As of December 31, 2024 and 2023, the total outstanding balance of stockholder advances, including accrued and capitalized interest, was $14,860 and $14,250, respectively, payable on demand. This shows the magnitude of these related party transactions and how they have evolved with the introduction of interest.
It's important for potential franchisees to understand these related-party transactions, as they can impact the company's financial stability and cash flow. While the amounts appear relatively small, the trend and the terms (payable on demand) are worth noting. Franchisees should consider asking Exit about the nature of these advances, the reasons for the change in interest policy, and the potential impact on the company's financial performance.