How much was the litigation settlement accrual for Exit in 2024?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
| 2024 | 2023 | 2022 | |
|---|---|---|---|
| Revenue | $ 15,421,227 | $ 15,991,792 | $ 17,858,393 |
| Operating expenses | |||
| Advertising and promotion | 2,335,585 | 2,858,751 | 2,880,073 |
| Amortization and depreciation | 65,563 | 92,338 | 125,888 |
| Ancillary expenses | 155,129 | 159,378 | 209,692 |
| Credit loss (recovery) expense | 351,755 | 1,304,738 | 382,936 |
| Bank charges | 261,316 | 246,186 | 234,654 |
| Commissions | 68,380 | 198,365 | 111,540 |
| Contract services | 951,910 | 883,805 | 972,546 |
| Fees and dues | 27,450 | 30,231 | 33,494 |
| Information technology | 504,587 | 519,057 | 470,750 |
| Insurance | 158,867 | 146,300 | 97,700 |
| Office and general | 83,168 | 64,051 | 83,463 |
| Postage and delivery | 50,372 | 77,943 | 102,833 |
| Professional fees | 921,810 | 512,417 | 334,687 |
| Rent | 302,011 | 305,396 | 293,000 |
| Repairs and maintenance | - | 2,787 | 8,364 |
| Salaries and benefits | 7,692,843 | 7,205,125 | 7,900,241 |
| Telephone | 18,920 | 25,306 | 26,585 |
| Trade shows and conventions | 1,778,283 | 2,020,763 | 2,845,425 |
| Training and development | 712,731 | 1,078,879 | 1,452,332 |
| Travel | 87,949 | 147,007 | 136,233 |
| Vehicles | 7,335 | 5,902 | 7,405 |
| Miscellaneous | 36,710 | - | - |
| Total operating expenses | 16,572,674 | 17,884,725 | 18,709,841 |
| Loss from operations | (1,151,447) | (1,892,933) | (851,448) |
| Other income (expense) | |||
| Gain on sale of property and equipment | 2,125,033 | - | 20,291 |
| Impairment of digital assets | - | - | (1,820,185) |
| Legal settlement | (1,500,000) | - | - |
| Interest | 137,304 | 78,187 | 170,816 |
| Total other income (expense) | 762,337 | 78,187 | (1,629,078) |
| Loss before provision for income taxes and non-controlling | |||
| interests | (389,110) | (1,814,746) | (2,480,526) |
| Benefit for income taxes | (459,827) | (486,997) | (342,266) |
| Consolidated net income (loss) | 70,717 | (1,327,749) | (2,138,260) |
| Noncontrolling interest in subsidiary's loss | 616 | 463 | 691 |
| Net income (loss) before foreign currency translation gain (loss) | 71,333 | (1,327,286) | (2,137,569) |
| Foreign currency translation gain (loss), net of tax | (162,790) | 7,338 | (40,611) |
| Net comprehensive loss | $ (91,457) | $ (1,319,948) | $ (2,178,180) |
EXIT REALTY CORP. INTERNATIONAL
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, the litigation settlement accrual for the year 2024 was $1,500,000. This figure is part of the adjustments made to reconcile net income (loss) to net cash used in or provided by operating activities, as detailed in the consolidated statements of cash flows.
This accrual represents an estimate of the amount Exit expects to pay in relation to ongoing or potential legal settlements. It's important to note that this is an accrual, meaning it's an expense recognized in the financial statements even if the actual cash payment hasn't been made yet. The accrual impacts Exit's financial statements by reducing net income and affecting the cash flow from operating activities.
For a prospective franchisee, this information indicates that Exit has faced legal challenges requiring significant financial consideration. While the FDD does not specify the nature of the litigation, the size of the settlement accrual suggests it could be a material issue. It would be prudent for potential franchisees to inquire about the details of this litigation and its potential impact on the franchise system's financial stability and reputation.