What is the nature of the VIE (Variable Interest Entity) in The Standardx's Bahia Principe transaction?
The_Standardx Franchise · 2025 FDDAnswer from 2025 FDD Document
Bahia Principe—During the year ended December 31, 2024, we entered into a shareholders' agreement with an unrelated third-party and acquired 50% of the outstanding shares of Management Hotelero Piñero, S.L. The joint venture, which is a VIE, owns the Bahia Principe brand and manages Bahia Principe Hotels & Resorts-branded properties (see Note 7). Through our variable interest, we have the power to direct the activities that most significantly affect the economic performance of the VIE and have the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE and therefore, we are the primary beneficiary. We consolidate the operating results and financial position of this VIE in our consolidated financial statements within our management and franchising segment.
The following table summarizes the VIE's assets and liabilities, including the effect of foreign currency translation, recorded on our consolidated balance sheet at December 31, 2024. The assets may only be used to settle obligations of the consolidated VIE, if any. In addition, there is no recourse to us for the consolidated VIE's liabilities.
Source: Item 23 — Receipts (FDD pages 85–132)
What This Means (2025 FDD)
According to The Standardx's 2025 Franchise Disclosure Document, the company entered into a shareholders' agreement with an unrelated third party and acquired 50% of the outstanding shares of Management Hotelero Piñero, S.L. during the year ended December 31, 2024. This joint venture is a Variable Interest Entity (VIE) that owns the Bahia Principe brand and manages Bahia Principe Hotels & Resorts-branded properties. The Standardx, through its variable interest, has the power to direct the activities that most significantly affect the economic performance of the VIE.
The Standardx has the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE, making it the primary beneficiary. As a result, The Standardx consolidates the operating results and financial position of this VIE in its consolidated financial statements within its management and franchising segment. The assets of the VIE may only be used to settle its obligations, and there is no recourse to The Standardx for the VIE's liabilities.
For a prospective franchisee, this means that The Standardx's financial performance is linked to the performance of the Bahia Principe brand and its managed properties. While The Standardx benefits from the VIE's success, it also bears the risk of potential losses. However, the franchisee should note that the assets of the VIE can only be used to settle the VIE's obligations, and there is no recourse to The Standardx for the VIE's liabilities. This structure could provide some level of insulation for The Standardx from the VIE's financial obligations.