What constitutes net fees for The Standardx, and how are they calculated?

According to The Standardx's 2025 Franchise Disclosure Document, net fees are calculated by taking the gross fees and reducing them by key money assets amortization and performance cure payments, which are essentially payments made to customers. Gross fees encompass various revenue streams, including base management fees, incentive management fees, and franchise fees. Base management fees are typically a percentage of gross revenues, while incentive management fees are based on hotel profitability. Franchise fees include initial franchise fees and ongoing royalty fees, which are a percentage of gross room revenues and, if applicable, food and beverage revenues. They also include termination fees and license fees from co-branded credit card programs and branded residential unit sales.

Key money assets refer to consideration provided to customers, which The Standardx records as assets and amortizes over the expected customer life, usually the initial term of the management, hotel services, or franchise agreement. Performance cure payments are payments made to customers to address specific performance issues or to compensate for unmet expectations. By subtracting these customer-related payments and amortized assets from the gross fees, The Standardx arrives at the net fees figure.

For a prospective franchisee, understanding the distinction between gross and net fees is crucial. Gross fees represent the total revenue generated from various sources, while net fees reflect the actual revenue retained by The Standardx after accounting for customer-related expenses. This distinction is important for assessing the true profitability and financial performance of a The Standardx franchise. Franchisees should pay close attention to the terms and conditions related to key money assets and performance cure payments, as these can impact the overall financial picture. It is also important to understand how these deductions are calculated and applied to ensure accurate financial reporting and transparency.

In the franchise industry, it is common for franchisors to report both gross and net revenue figures to provide a comprehensive view of their financial performance. However, the specific components of these calculations can vary depending on the franchise system and industry. Therefore, it is essential for prospective franchisees to carefully review the FDD and seek clarification from The Standardx regarding any questions or concerns about the calculation of net fees.