What is the basis for The Standardx's maximum exposure regarding debt repayment guarantees?
The_Standardx Franchise · 2025 FDDAnswer from 2025 FDD Document
Debt Repayment Guarantees—We enter into various debt repayment guarantees in order to assist third-party owners, franchisees, and unconsolidated hospitality ventures in obtaining third-party financing or to obtain more favorable borrowing terms.
- (1) Our maximum exposure is generally based on a specified percentage of the total principal due upon borrower default.
- (2) Certain underlying debt agreements have extension periods which are not reflected in the year of guarantee expiration.
- (3) We have agreements with our unconsolidated hospitality venture partners or the respective third-party owners or franchisees to recover certain amounts funded under the debt repayment guarantee; the recoverability mechanism may be in the form of cash or HTM debt security.
- (4) Certain agreements give us the ability to assume control of the property if defined funding thresholds are met or if certain events occur.
At December 31, 2024, we are not aware, nor have we received any notification, that our third-party owners, franchisees, or unconsolidated hospitality ventures are not current on their debt service obligations where we have provided a debt repayment guarantee.
Source: Item 10 — OTHER ASSETS (FDD pages 132–156)
What This Means (2025 FDD)
According to The Standardx's 2025 Franchise Disclosure Document, the company's maximum exposure regarding debt repayment guarantees is generally based on a specified percentage of the total principal due upon borrower default. These guarantees are put in place to assist third-party owners, franchisees, and unconsolidated hospitality ventures in securing third-party financing or to achieve more favorable borrowing terms.
The Standardx has agreements that allow them to recover amounts funded under the debt repayment guarantee from their unconsolidated hospitality venture partners, third-party owners, or franchisees. This recovery can be in the form of cash or HTM debt security. In some agreements, The Standardx has the ability to assume control of the property if certain funding thresholds are met or if specific events occur.
As of December 31, 2024, The Standardx states they were not aware of any third-party owners, franchisees, or unconsolidated hospitality ventures being behind on their debt service obligations where The Standardx provided a debt repayment guarantee. This suggests that while the potential exposure exists, The Standardx actively manages these risks through various recovery mechanisms and monitoring of the financial health of those they guarantee.