How are ROU assets and related liabilities recognized by Exit at the commencement date?

According to Exit's 2025 Franchise Disclosure Document, Upper Midwest Realty, Inc. d.b.a. Exit Realty Upper Midwest recognizes Right-of-Use (ROU) assets and related lease liability obligations on the balance sheets. These assets and liabilities, according to the document, are recognized at the lease commencement date. The value is based on the present value of lease payments over the lease term.

Operating leases are included in Right-of-Use (ROU) assets, and lease liability obligations are included in the Balance Sheets, except for those that qualify for the short-term scope exception of twelve months or less. ROU assets represent the right to use an underlying asset for the lease term and lease liability obligations represent the obligation to make lease payments arising from the lease.

For a prospective Exit franchisee, this means that when entering into a lease agreement for their business location, Exit will account for the lease by recognizing an asset representing the right to use the property (ROU asset) and a corresponding liability representing the obligation to make lease payments. The amounts recognized are based on the present value of the lease payments, essentially discounting the future payments to their current worth. This accounting treatment provides a more transparent view of Exit's lease obligations and asset utilization on its balance sheet.