When does Exit recognize revenue from commissions and transaction fees?

According to Exit's 2025 Franchise Disclosure Document, revenue from commissions and transaction fees is recognized in the period when the franchisee earns the revenue upon which the fee is based. This recognition is contingent upon the reasonable assurance of collectability from the customer. Commissions are calculated as a percentage of the net sales earned by the franchisee, while transaction fees are flat fees that vary based on the revenue generated by the franchisee.

For Exit franchisees, this means that the company recognizes its income from these sources at the same time the franchisee earns their commission, provided that Exit believes they will actually receive the payment. This policy aligns revenue recognition with the actual performance of services and generation of sales, which is a standard accounting practice. The transaction fees are payable by the franchisee to the subfranchise and Exit at the finalization of the transaction side and are deducted from the sales representative's portion of the commission.

Furthermore, the FDD specifies that transaction fees are tied to specific commission levels. For instance, transaction fees range from $50 to $400 based on the gross commission earned by the franchisee, with higher commissions incurring higher fees. This structure ensures that Exit's revenue from transaction fees is directly proportional to the success and earnings of its franchisees. The maximum transaction fees paid per calendar year per sales representative is $2,700, pro-rated in the first calendar year.

This revenue recognition policy and fee structure have several implications for prospective franchisees. It ensures transparency in how Exit recognizes its revenue and aligns the company's financial interests with the franchisees' performance. Franchisees should understand the commission and transaction fee structure to accurately forecast their potential earnings and obligations to Exit.