What was the total amount of notes receivable for Exit in 2023?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
dwill of the Company (or a reporting unit) shall be tested for impairment if an event occurs, or circumstances change that indicates the fair value of the Company (or the reporting entity) may be below its carrying amount.
NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (continued)
Goodwill (continued)
The Company has recorded goodwill associated with the acquisition of Legacy Success Group, LLC on January 1, 2018. During the year ended December 31, 2020, the Company assigned an additional $6,250 to goodwill in relation to the purchase agreement. The goodwill is associated with Legacy Success Group, LLC's reputation within its respective industry, totaling $24,973. The Company began to amortize it over a ten-year period effective January 1, 2018. Management has determined that there has been no impairment related to this goodwill for the years ended December 31, 2024, 2023, and 2022. Amortization expense totaled $2,914 for the years ended December 31, 2024, 2023, and 2022, respectively.
The gross carrying amount and accumulated amortization of intangible assets subject to amortization is as follows:
| ASSETS | ||||||
|---|---|---|---|---|---|---|
| 2024 | 2023 | 2022 | ||||
| Current assets | ||||||
| Cash and cash equivalents | $ - | $ - | $ 165,530 | |||
| $458,976 | respectively | 644,643 | 859,378 | 621,432 | ||
| Short-term investment | 531,970 | 189,022 | 186,041 | |||
| Income tax receivable | 220,618 | 672,410 | - | |||
| Prepaid expenses | 103,497 | 237,657 | 116,502 | |||
| Current portion - notes receivable | 1,409,859 | 1,056,201 | 1,355,483 | |||
| Due from shareholders | 278,107 | - | - | |||
| Total current assets | 3,188,694 | 3,014,668 | 2,444,988 | |||
| Other assets | ||||||
| Advances to related parties | 2,256,933 | 2,287,705 | 2,199,967 | |||
| Notes receivable (net) | 7,601,842 | 8,704,995 | 11,839,353 | |||
| Property and equipment (net) | 205,458 | 271,020 | 328,683 | |||
| Digital assets (net) | - | 943,094 | 943,094 | |||
| Regional rights | 11,049,112 | 11,049,112 | 8,679,201 | |||
| Deferred income tax asset - United States taxes | 767,000 | 428,000 | 485,000 | |||
| Total other asse |
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, the total notes receivable in 2023 was $9,761,196. The notes receivable are balances due to Exit from sub-franchisors for the sale of Canadian and U.S. regions. These notes bear interest, ranging from 3.00% to 10.00%, and mature between 2024 and 2033. They are secured by performance contracts within the franchise agreements.
Of the total notes receivable, $1,056,201 was the current portion, meaning it was due within one year. The long-term portion of the notes receivable was $8,704,995. Notes receivable are impacted when Exit reacquires a region due to non-performance by a sub-franchisor; the uncollected amount is then added to the cost of regional rights on Exit's balance sheet. In 2023, regions reacquired for nonperformance amounted to $2,369,911.
For a prospective franchisee, understanding the nature and collectability of these notes is crucial. The ability of Exit's sub-franchisors to meet their obligations influences Exit's financial health. Significant write-downs of these notes could negatively impact Exit's profitability and, consequently, the support and services it can provide to its franchisees. A prospective franchisee should inquire about the creditworthiness of Exit's sub-franchisors and the historical collection rates on these notes receivable.