How does Exit recognize initial and renewal fees as revenue?

According to Exit's 2025 Franchise Disclosure Document, initial and renewal fees are recognized as revenue on a straight-line basis over the term of the respective franchise agreement. This means that Exit does not recognize the entire fee as revenue immediately upon receipt. Instead, it spreads the recognition of the revenue evenly over the life of the franchise agreement.

For a prospective Exit franchisee, this means that the initial and renewal fees you pay to Exit are not fully recognized as their revenue upfront. This accounting practice aligns with the principle of matching revenues with the services provided over time. Any consideration received in advance of performing all significant services is included in deferred revenue and recorded as a liability, meaning Exit acknowledges its obligation to provide services in the future for the fees already collected.

This approach is a standard accounting practice (ASC 606) that ensures Exit's financial statements accurately reflect the value of services provided during each accounting period. It also provides a more transparent view of Exit's financial performance over the long term, as revenue is recognized consistently throughout the franchise agreement's duration.