What personnel costs are included in Remax's selling, operating, and administrative expenses?
Remax Franchise · 2025 FDDAnswer from 2025 FDD Document
Selling, operating and administrative expenses primarily consist of personnel costs, including salaries, benefits, payroll taxes and other compensation expenses, professional fees, lease costs, as well as expenses for outsourced technology services and expenses for marketing to customers, to expand the Company's franchises.
During the fourth quarter of 2024, the Company restructured its support services intended to further enhance the overall customer experience. As a result of this restructuring, for the year ended December 31, 2024, the Company incurred $1.3 million of severance and related expenses and accelerated equity compensation expense of $0.3 million, which are recognized as "Selling, operating and administrative expenses" in the Consolidated Statements of Income (Loss).
During the third quarter of 2023, the Company announced a reduction in force and reorganization (the "Reorganization") intended to streamline the Company's operations and yield cost savings over the long term. The Reorganization reduced the Company's overall workforce by approximately 7% and was substantially complete by the end of the third quarter. As a result of the Reorganization, the Company incurred a pre-tax cash charge for one-time termination benefits of severance and related costs of $4.3 million and accelerated equity compensation expense of $0.5 million, which are recognized as
"Selling, operating and administrative expenses" in the Consolidated Statements of Income (Loss).
During the third quarter of 2022, the Company began incurring expenses related to a restructuring in its business and technology offerings with the phased rollout of the BoldTrail platform (formerly kvCORE), replacing the functionality previously provided by the internally developed platform. A significant amount of these costs are termination benefits related to workforce reductions including severance and related expenses received by former employees. For the year ended 2022, the Company incurred $11.7 million of expenses related to this restructure, including $7.6 million of severance and related expenses, $2.2 million of accelerated equity-based compensation expense, which are recognized as "Selling, operating and administrative expenses" in the Consolidated Statements of Income (Loss) and a $1.2 million write off of capitalized software development costs and $0.7 million of accelerated amortization, which are recognized as "Depreciation and amortization" in the Consolidated Statements of Income (Loss).
The Company recognizes compensation expense associated with equity-based compensation as a component of "Selling, operating and administrative expenses" in the accompanying Consolidated Statements of Income (Loss).
Increases and decreases in the allowance for doubtful accounts are established based upon changes in the credit quality of receivables and are included as a component of "Selling, operating and administrative expenses" in the accompanying Consolidated Statements of Income (Loss).
Source: Item 1 — Business and Organization (FDD pages 334–464)
What This Means (2025 FDD)
According to Remax's 2025 Franchise Disclosure Document, selling, operating, and administrative expenses include various personnel costs. These costs primarily consist of salaries, benefits, payroll taxes, and other compensation expenses.
Additionally, the document mentions restructuring charges that impact these expenses. For example, during the fourth quarter of 2024, Remax incurred $1.3 million in severance and related expenses and $0.3 million in accelerated equity compensation expense due to restructuring, all of which were recognized as selling, operating, and administrative expenses. Similarly, a reorganization in 2023 resulted in $4.3 million in one-time termination benefits and $0.5 million in accelerated equity compensation expense, also included in these expenses. In 2022, restructuring expenses totaled $11.7 million, including $7.6 million for severance and related expenses and $2.2 million for accelerated equity-based compensation expense.
Furthermore, Remax recognizes compensation expenses associated with equity-based compensation as a component of selling, operating, and administrative expenses. These equity-based compensations are measured at fair value and expensed over the service period, generally three years. Increases and decreases in the allowance for doubtful accounts are also included as a component of "Selling, operating and administrative expenses".