What method does The Standardx use to determine the revenues allocated to the license of the brand name?

According to The Standardx's 2025 Franchise Disclosure Document, the company uses a "relief from royalty method" to determine the revenues allocated to the license of its brand name. The revenues are then recognized over time as the licensee benefits from having access to The Standardx's brand name. To assist in this process, The Standardx engages a third-party valuation specialist because significant judgment is required to determine the relative standalone selling prices.

The "relief from royalty method" estimates the fair value of an intangible asset (like a brand name) by calculating the hypothetical royalty payments that a company would be willing to pay a third party for the right to use that asset. This method is commonly used in franchise valuations because it directly ties the brand's value to the revenue it generates. The Standardx also uses other methods such as discounted future cash flow models.

For a prospective The Standardx franchisee, this means that a portion of their revenues will be attributed to the value of The Standardx's brand name. This allocation is not arbitrary but is based on a valuation that considers market conditions and the benefits the franchisee receives from using the brand. The use of a third-party valuation specialist aims to ensure that this allocation is fair and accurate. The revenues are recognized over time as the licensee benefits from access to The Standardx's brand name.

It's important for potential franchisees to understand how this revenue allocation affects their financial obligations and profitability. They should also inquire about the specific assumptions and data used in the "relief from royalty method" to ensure they are comfortable with the valuation. Understanding this methodology can help franchisees better assess the value they receive from The Standardx brand and how it impacts their overall financial performance.