How does Remax amortize its franchise agreements?
Remax Franchise · 2025 FDDAnswer from 2025 FDD Document
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The Company's franchise agreements result from franchise rights acquired from Independent Region acquisitions and are initially recorded at fair value. The Company amortizes the franchise agreements over their estimated useful life on a straight-line basis.
The Company also purchases and develops software for internal use. Software development costs and upgrade and enhancement costs incurred during the application development stage that result in additional functionality are capitalized. Costs incurred during the preliminary project and post-implementation operation stages are expensed as incurred. Capitalized software costs are generally amortized over a term of two to five years. Purchased software licenses are amortized over their estimated useful lives.
The Company reviews its franchise agreements and other intangible assets subject to amortization for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Source: Item 1 — Business and Organization (FDD pages 334–464)
What This Means (2025 FDD)
According to Remax's 2025 Franchise Disclosure Document, franchise agreements are amortized over their estimated useful life using the straight-line method. These franchise agreements result from franchise rights acquired from Independent Region acquisitions and are initially recorded at fair value.
In accounting terms, amortization is the systematic allocation of the cost of an intangible asset over its useful life. The straight-line method means that Remax recognizes an equal amount of expense each year until the asset is fully amortized. This provides a consistent and predictable expense recognition over the life of the franchise agreement.
Furthermore, Remax reviews its franchise agreements and other intangible assets subject to amortization for impairment. This review is triggered by events or changes in circumstances that suggest the carrying amount of an asset may not be recoverable. If the carrying amount of an asset exceeds its estimated discounted cash flows, the excess is charged to operations as an impairment loss. However, for the years ended December 31, 2024, 2023 and 2022, there were no material impairments indicated for such assets.