When does the management agreement for Exit, which determines the recognition of management fee income, expire?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
Under ASC 606, management fee income is recognized as revenue on a straight-line basis over the term of the respective management agreement which commenced on September 10, 2023, and is set to expire on September 10, 2033. Consideration received in advance of performing all significant services is included in deferred revenue and recorded as a liability.
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, the management fee income is recognized as revenue on a straight-line basis over the term of the respective management agreement. This agreement commenced on September 10, 2023, and is scheduled to expire on September 10, 2033.
This means that Exit recognizes revenue from management fees consistently over the ten-year period from the agreement's start date. For a prospective franchisee, this information is relevant for understanding how Exit recognizes revenue and manages its financial obligations related to providing sales and management services.
The management agreement covers Exit's obligations to oversee franchise sales, provide leadership for franchisees, oversee compliance issues, and plan the expenditures of marketing funds for specific USA regions. These services are considered a single performance obligation satisfied over time, which aligns with the revenue recognition method.