How are software and training fees recognized by Exit?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
Under ASC 606, initial and renewal fees, are recognized as revenue on a straight-line basis over the term of the respective franchise agreement. Consideration received in advance of performing all significant services is included in deferred revenue and recorded as a liability.
Franchisee shall utilize computer hardware and software as required by EXIT, including such proprietary computer software as EXIT may develop for use in connection with the EXIT System. Franchisee shall submit to EXIT and Subfranchisor such forms, reports, and records as specified and at the times indicated in this Agreement, in the Training Manuals and in other written communications from EXIT and Subfranchisor. EXIT has developed and implemented a computer based information system for purposes of maintaining a uniform electronic database of franchisee profiles, books and records. Franchisee agrees to co-operate in the ongoing development of this system, to pay a license fee not to exceed two hundred and fifty dollars ($250.00) per month related to computer software, to maintain records through this system, and to file and receive reports electronically to and from EXIT and Subfranchisor as may be required by the System. This monthly fee is to be paid through automatic monthly withdrawal. If Franchisee owns more than one (1) EXIT Franchise Agreement, and those Agreements are operated by the same legal entity and use the same trade name, the monthly computer software license fee for the second and
subsequent Franchise Agreements shall be reduced to twenty-five percent (25%) of the monthly license fee charged as of the date that the subsequent Franchise Agreement(s) is signed.
- (A) Franchisee and an individual who will serve as the broker of record, or administrator of the Franchise Office shall, at Franchisee's own expense, prior to opening its office, attend and complete to Subfranchisor's and EXIT's satisfaction the next scheduled five (5) day franchisee management training course conducted for franchisees at a predetermined location by Subfranchisor or EXIT. There are no charges for the training course or manuals for approved attendees from each Franchise. However, Franchisee is responsible for its travel, lodging, meals, and related expenses. Franchisee agrees to pay EXIT $500.00, if Franchisee signs up and fails to attend the training offered by EXIT, or if Franchisee cancels attendance at the EXIT training course on less than thirty (30) days' prior notice to EXIT. If Franchisee cancels within 10 days or less then the cancellation fee is $1,000. At the option of EXIT, some or all of the training may be online.
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
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. Consideration received in advance of performing all significant services is included in deferred revenue and recorded as a liability. This means that Exit does not recognize the full amount of these fees immediately upon receipt. Instead, they spread the recognition of the revenue over the life of the franchise agreement. This is a common accounting practice that aligns revenue recognition with the delivery of services over time.
For software fees, Exit franchisees must utilize computer hardware and software as required by Exit, including proprietary computer software. Franchisees pay a license fee not to exceed $250.00 per month related to computer software. If a franchisee owns more than one Exit Franchise Agreement operated by the same legal entity and using the same trade name, the monthly computer software license fee for the second and subsequent Franchise Agreements is reduced to 25% of the monthly license fee charged as of the date that the subsequent Franchise Agreement(s) is signed.
Regarding training, Exit requires the franchisee and an individual who will serve as the broker of record or administrator to attend and complete a five-day franchisee management training course. There are no charges for the training course or manuals for approved attendees from each Franchise. However, the franchisee is responsible for their travel, lodging, meals, and related expenses. If a franchisee signs up and fails to attend the training offered by Exit, or if the franchisee cancels attendance at the Exit training course on less than thirty days' prior notice to Exit, the franchisee agrees to pay Exit $500.00. If the franchisee cancels within 10 days or less, then the cancellation fee is $1,000. At the option of Exit, some or all of the training may be online.