What was the amount of impairment losses for The Standardx during the year?
The_Standardx Franchise · 2025 FDDAnswer from 2025 FDD Document
| Management and franchising | Owned and leased | Distribution (1) | Overhead | Unallocated (2) | Total | |
|---|---|---|---|---|---|---|
| Balance at January 1, 2023 | ||||||
| Goodwill | $ 1,465 | $ 210 | $ 1,589 | $ 2 | $ — | $ 3,266 |
| Accumulated impairment losses | (4) | (161) | — | — | — | (165) |
| Goodwill, net | $ 1,461 | $ 49 | $ 1,589 | $ 2 | $ — | $ 3,101 |
| Activity during the year | ||||||
| Additions | 62 | — | 39 | — | — | 101 |
| Foreign currency translation | 3 | — | — | — | — | 3 |
| adjustments | ||||||
| Balance at December 31, 2023 | ||||||
| Goodwill | 1,530 | 210 | 1,628 | 2 | — | 3,370 |
| Accumulated impairment losses | (4) | (161) | — | — | — | (165) |
| Goodwill, net | $ 1,526 | $ 49 | $ 1,628 | $ 2 | $ — | $ 3,205 |
| Activity during the year | ||||||
| Additions | 86 | — | — | — | 336 | 422 |
| Disposals | — | — | (914) | — | — | (914) |
| Impairment losses | (110) | (15) | (38) | — | — | (163) |
| Measurement period adjustments | — | — | (1) | — | — | (1) |
| (Note 7) | ||||||
| Foreign currency translation | (7) | — | — | — | (1) | (8) |
| adjustments |
Source: Item 23 — Receipts (FDD pages 85–132)
What This Means (2025 FDD)
According to The Standardx's 2025 Franchise Disclosure Document, the company recognized impairment losses of $163 million during the year. This figure is broken down by segment, with $110 million in impairment losses from management and franchising, $15 million from owned and leased segments, and $38 million from distribution.
These impairment losses can significantly impact The Standardx's profitability and financial health. For a franchisee, this could mean the franchisor has less capital to invest in supporting the franchise system, such as marketing, training, or technology upgrades. It could also signal potential financial instability for The Standardx, which could affect its ability to fulfill its obligations to franchisees.
It's important to note that these losses are related to goodwill, which is an intangible asset representing the value of a company's brand, customer relationships, and other factors that contribute to its overall worth. Impairment occurs when the carrying value of goodwill on the balance sheet exceeds its fair value, indicating that the asset is overvalued. The Standardx estimated the fair values of goodwill using a weighted methodology considering the output from both a discounted future cash flow model and the guideline public companies method. The assumptions and judgments included projected future cash flows, discount rate, and capitalization rate.
Prospective franchisees should carefully review The Standardx's financial statements and ask detailed questions about the reasons for these impairment losses and their potential impact on the franchise system. Understanding the underlying causes and the company's plans to address these issues is crucial for making an informed investment decision.