What is the general basis for The Standardx's maximum exposure regarding borrower default?
The_Standardx Franchise · 2025 FDDAnswer from 2025 FDD Document
- (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 March 31, 2025, 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 1 — Financial Statements. (FDD pages 156–187)
What This Means (2025 FDD)
According to The Standardx's 2025 Franchise Disclosure Document, the company's maximum exposure regarding borrower default is generally based on a specified percentage of the total principal due upon borrower default. This means that if a borrower fails to meet their repayment obligations, The Standardx's potential loss is capped at a predetermined percentage of the outstanding loan amount. This mechanism helps The Standardx manage and limit its financial risk associated with guaranteeing debt repayment.
However, the FDD also notes complexities that could affect this exposure. Certain underlying debt agreements have extension periods not reflected in the guarantee's expiration year, potentially prolonging The Standardx's risk. Additionally, The Standardx has agreements with hospitality venture partners, third-party owners, or franchisees to recover amounts funded under the debt repayment guarantee. This recovery may come in the form of cash or HTM (held-to-maturity) debt security, providing avenues to recoup losses.
Furthermore, some agreements allow The Standardx to assume control of the property if specific funding thresholds are met or certain events occur. This provision could provide an opportunity to mitigate losses by taking over and managing the asset. As of March 31, 2025, The Standardx stated they were unaware of any third-party owners, franchisees, or unconsolidated hospitality ventures being behind on their debt service obligations where The Standardx has provided a debt repayment guarantee.