What was the original cost of Exit's goodwill as of December 31, 2024?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
| 2025 | $ | 84,065 |
|---|---|---|
| 2026 | 84,065 | |
| 2027 | 84,065 | |
| 2028 | 83,997 | |
| 2029 | 83,808 | |
| Thereafter | 309,814 | |
| Total estimated amortization expense | $ 729,814 |
Goodwill
In accordance with update 2014-02 to the FASB Accounting Standards Codification (ASC) 350, Intangibles – Goodwill and Other, the Company has elected to apply the accounting alternative for goodwill. The accounting alternative allows an entity to take goodwill relating to each business combination or reorganization event resulting in fresh-start reporting (amortizable unit of goodwill) and amortize it on a straight-line basis
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, the company recorded goodwill associated with the acquisition of Legacy Success Group, LLC on January 1, 2018. During the year ended December 31, 2020, Exit assigned an additional $6,250 to goodwill related to the purchase agreement. The total goodwill associated with Legacy Success Group, LLC's reputation within its respective industry amounted to $24,973. Exit began amortizing this goodwill over a ten-year period starting January 1, 2018. Management determined that there was no impairment related to this goodwill for the years ended December 31, 2024, 2023, and 2022. Amortization expense totaled $2,914 for each of the years ended December 31, 2024, 2023, and 2022. Therefore, the original cost of Exit's goodwill as of December 31, 2024 was $24,973.
For a prospective Exit franchisee, understanding goodwill and its amortization is crucial for assessing the financial health and stability of the franchise system. Goodwill, in this context, represents the intangible value associated with the reputation and brand recognition of Legacy Success Group, LLC, which Exit acquired. The fact that Exit is amortizing this goodwill over a ten-year period means that they are systematically reducing its value on their balance sheet over time, reflecting its gradual consumption or expiration.
The consistent amortization expense of $2,914 per year indicates a steady and predictable reduction in the goodwill value. The management's determination that there has been no impairment related to this goodwill for the past three years suggests that the value of the acquired reputation has been maintained and has not suffered any significant decline. This can be seen as a positive sign for potential franchisees, as it indicates that the acquired business continues to perform well and contribute to the overall value of the Exit franchise system.
However, it's important for prospective franchisees to further investigate the nature of this goodwill and its impact on their specific franchise location. Understanding how the reputation and brand recognition of Legacy Success Group, LLC, translates into tangible benefits for franchisees, such as increased customer traffic or higher sales, is essential for making an informed investment decision. Additionally, franchisees should inquire about any potential risks or challenges that could affect the value of this goodwill in the future, such as changes in market conditions or increased competition.