What was the cost of franchise territories for Exit franchisees as of December 31, 2024?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
to Financial Statements December 31, 2024, 2023, and 2022**
NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES
Business description
Upper Midwest Realty, Inc. d.b.a. Exit Realty Upper Midwest, located in Lakeville, Minnesota, is registered as a sub-franchisor of Exit Realty Corp. International and has purchased the rights to sell Exit Realty Franchises and operate in the states of Minnesota, North Dakota, South Dakota, Iowa, Wisconsin, Michigan, Illinois, Colorado, Indiana, Kansas, Missouri, Nebraska, and Wyoming. The franchises were granted by Exit Realty Corp. International and expire in 2033. The sub-franchisor agreements can be renewed for two additional ten-year terms. Exit Realty is a system for the establishment of businesses which offer full service real estate services in North America.
Basis of presentation
The accompanying financial statements are presented in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) as codified by the Financial Accounting Standards Board (FASB).
Franchising
The Company executes franchise agreements that set the terms of its arrangement with each franchisee. The agreements cover a five-year period. The franchise agreements require the franchisee to pay an initial, nonrefundable fee of $7,500 for a rural density franchise, $15,000 for a medium density franchise, and $25,000 for a high-density franchise, and continuing fees based upon a percentage of sales. Subject to the Company's approval and payment of a renewal fee, a franchisee may generally renew its agreement upon its expiration. Direct costs of sales and servicing of franchise agreements are charged to operating expenses as incurred.
Revenue recognition
The Company accounts for revenue in accordance with FASB ASU No. 2019-09, Revenue from contracts with Customers (Topic 606).
Performance obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the client and is the unit of accounting in Topic 606.
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, the initial franchise fee depends on the density of the territory. The initial, nonrefundable fee is $7,500 for a rural density franchise, $15,000 for a medium density franchise, and $25,000 for a high-density franchise. These fees are fully earned by the subfranchisor upon the execution of the franchise agreement.
Upper Midwest Realty, Inc., a sub-franchisor of Exit Realty Corp. International, had notes payable for franchise territories in Wisconsin ($320,074), Minnesota ($158,179), and Michigan ($628,349) as of December 31, 2024. These notes, dated between 2013 and 2021 and amended on September 12, 2023, are payable in monthly installments through September 2033 and accrue interest at 3.00% per annum. For the Illinois territory, the note payable was $345,963 as of December 31, 2024.
These figures represent the outstanding balances on notes payable related to franchise territories, not necessarily the original cost of the territories. The initial franchise fee paid by a new franchisee is separate from these pre-existing financial obligations of the sub-franchisor. The cost of franchise territories are amortized over the life of the contract. Franchise fees vary depending on the population of the territory included in the purchase.