How does Exit handle consideration received in advance of performing all significant services related to assignment income?

According to Exit's 2025 Franchise Disclosure Document, assignment income is generated from the transfer of rights or obligations under an existing franchise agreement from one franchisee to another, or from the transfer of ownership interests in a franchisee entity. Exit recognizes revenue from assignment income when control of the franchise rights or ownership is transferred to the new franchisee, and when Exit has satisfied its performance obligations under the agreement.

Unlike initial and renewal fees or management fees, which are recognized on a straight-line basis over the term of the agreement, assignment income is recognized at a specific point in time. This means that Exit does not defer revenue related to assignment income; instead, it recognizes the revenue when the transfer is complete and its obligations are fulfilled.

For a prospective Exit franchisee, this means that any fees or consideration paid in advance for the assignment of a franchise agreement will be recognized as revenue by Exit only upon the completion of the transfer and satisfaction of their obligations. This approach aligns with standard accounting practices, ensuring that revenue is recognized when it is earned and the related services have been provided.