Does Exit expense advertising and promotion costs as incurred, or is there a different accounting method used?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
elopment rights). Franchise fee renewals are charged 10% of the then current initial franchise fee (not to exceed 25% of the initial franchise fee originally paid by the franchisee) and amortized as revenue over
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, the company expenses advertising and promotion costs as they are incurred. For the years ending December 31, 2024, 2023, and 2022, these expenses totaled approximately $2,335,585, $2,858,720, and $2,879,727, respectively. This accounting practice means that Exit recognizes these costs on its income statement in the same period that they are spent, rather than capitalizing them and amortizing them over a longer period.
For a prospective Exit franchisee, this information provides insight into how the company manages its finances and reports its expenses. Expensing advertising costs as incurred is a common and conservative accounting approach. It directly reflects the impact of advertising on the company's profitability in the period the expenses occur.
It is important to note that these figures represent Exit's advertising and promotion expenses at the corporate level. Individual franchisees may also have their own advertising expenses, which would be accounted for separately in their own financial statements. Understanding Exit's accounting policies helps franchisees interpret the company's financial statements and assess its financial health.