What was the expected volatility used in the Black-Scholes-Merton option-pricing model for The Standardx's SARs in 2023?

According to The Standardx's 2025 Franchise Disclosure Document, the expected volatility used in the Black-Scholes-Merton option-pricing model for its Stock Appreciation Rights (SARs) in 2023 was 37.37%. This figure is a key input in determining the fair value of SARs granted to employees or executives.

The Black-Scholes-Merton model is a standard tool for estimating the fair value of options, and expected volatility is a critical assumption within this model. It reflects the degree of variation in the price of The Standardx's stock expected over the term of the SARs. A higher expected volatility generally leads to a higher fair value of the SARs, as it increases the potential for the stock price to rise above the exercise price.

In addition to expected volatility, the model also incorporates other factors such as the exercise price ($111.71 in 2023), the expected life of the SARs (6.24 years), the risk-free interest rate (3.70% in 2023), and the annual dividend yield (— % in 2023). These inputs collectively determine the estimated fair value of the SARs at the grant date, which was $48.54 in 2023. The fair value is then used for accounting purposes to recognize compensation expense over the vesting period of the SARs.

Prospective franchisees are unlikely to be directly impacted by the valuation of SARs. However, understanding these figures can provide insight into The Standardx's compensation practices and how it incentivizes its employees and executives. This can be a useful element in assessing the overall financial health and management strategy of the company.