Under what circumstances does Remax assess goodwill for impairment?
Remax Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company assesses goodwill for impairment at least annually at the reporting unit level or whenever an event occurs that would indicate impairment may have occurred. Reporting units are driven by the level at which segment management reviews operating results. The Company performs its required impairment testing annually on October 1.
During the fourth quarter of 2023, the Company tested and identified impairment indicators associated with the Mortgage reporting unit in the Mortgage Segment, primarily due to a decline in projected net cash flows resulting from continued macroeconomic pressures and revised franchise sales forecasts. Therefore, the Company fully impaired the reporting unit's goodwill and recorded a non-cash impairment charge of $18.6 million in "Settlement and impairment charges" in the Consolidated Statements of Income (Loss).
During the fourth quarter of 2022, in connection with the strategic shift and restructuring of its business, the Company made the decision to wind down the Gadberry Group reporting unit. Therefore, the Company fully impaired the Gadberry Group reporting unit goodwill and recorded a non-cash impairment charge of $7.1 million, in "Settlement and Impairment charges" in the 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, the company assesses goodwill for impairment at least annually at the reporting unit level. Remax also assesses goodwill for impairment whenever an event occurs or circumstances change that would indicate impairment may have occurred. The reporting units are determined by the level at which segment management reviews operating results. The company performs its required impairment testing annually on October 1.
In 2023, Remax identified impairment indicators associated with the Mortgage reporting unit in the Mortgage Segment, primarily due to a decline in projected net cash flows resulting from continued macroeconomic pressures and revised franchise sales forecasts. As a result, the company fully impaired the reporting unit's goodwill and recorded a non-cash impairment charge of $18.6 million. In 2022, Remax impaired the Gadberry Group reporting unit goodwill and recorded a non-cash impairment charge of $7.1 million.
For a Remax franchisee, this means that the franchisor is actively monitoring the financial health of its various business segments. If a franchisee is considering acquiring an existing Remax franchise, it would be prudent to investigate whether the franchise has been subject to any recent goodwill impairment assessments, as this could indicate underlying financial issues. Understanding the factors that trigger these assessments can provide valuable insight into the overall risk and stability of the Remax franchise system.