How are Exit franchise fee renewals charged, and how are they amortized?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
Initial franchise and regional development rights fees are determined by geographic area and population in that area and are recorded as deferred franchise fee and regional development right fees and amortized as revenue over the life of the franchise agreement (generally five years for franchise rights and ten or fifteen years for regional development 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 the life of the renewed franchise agreement.
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, franchise fee renewals are charged at 10% of the then-current initial franchise fee, but this cannot exceed 25% of the initial franchise fee originally paid by the franchisee. These renewal fees are then amortized as revenue over the life of the renewed franchise agreement.
For a prospective Exit franchisee, this means that when you renew your franchise agreement, you will need to pay a renewal fee. The exact amount will depend on the initial franchise fee at the time of renewal and the initial fee you originally paid. It's important to note the cap of 25% of your original initial fee, which provides some predictability in renewal costs.
The amortization of the renewal fee as revenue over the life of the renewed agreement is an accounting practice that affects how Exit recognizes revenue, but it doesn't directly impact the franchisee's payment obligations. Franchisees should be aware of these renewal costs and factor them into their long-term financial planning when considering an Exit franchise.