What performance obligations does The Standardx have under the co-branded credit card agreements?

According to The Standardx's 2025 Franchise Disclosure Document, The Standardx has several performance obligations under its co-branded credit card agreements with a third party. These obligations include granting a license to use The Standardx name, arranging for the fulfillment of points issued to cardholders through the loyalty program, and awarding cardholders with free room nights when they reach certain milestones in the program. The loyalty points and free room nights are considered material rights, meaning they can be redeemed for free or discounted services in the future.

When customers use the co-branded credit cards, they accumulate points in The Standardx's loyalty program. The Standardx is then responsible for managing the redemption of these points, allowing cardholders to use them for stays and other benefits. Additionally, The Standardx must provide free room nights to cardholders who meet specific spending or usage criteria as part of the credit card program's rewards structure.

To fulfill these obligations, The Standardx must allocate consideration between the performance obligations based on their relative standalone selling prices. The Standardx utilizes a relief from royalty method to determine the revenues allocated to the license, and the revenues are recognized over time as the licensee derives value from access to The Standardx's brand name. The revenues allocated to loyalty program points and free night awards are deferred and recognized in revenues for reimbursed costs upon redemption or expiration of a card member's promotional awards, net of redemption expense when The Standardx is the agent. The Standardx is responsible for arranging for the redemption of promotional awards, but it does not directly fulfill the award night obligation except at owned and leased hotels. Therefore, The Standardx acts as an agent for managed and franchised hotels and as the principal for owned and leased hotels.

For a prospective franchisee, this means that a portion of The Standardx's revenue is tied to the success and usage of the co-branded credit card program. Franchisees may see increased customer loyalty and occupancy rates due to the rewards and benefits offered through the credit card program. However, franchisees should also be aware that The Standardx's role in fulfilling these rewards may vary depending on whether the hotel is managed, franchised, owned, or leased, which could impact the franchisee's responsibilities and revenue recognition.