How does The Standardx recognize initial fees received from third-party owners and franchisees?

According to The Standardx's 2025 Franchise Disclosure Document, initial fees received from third-party owners and franchisees are not treated as distinct performance obligations. Instead, The Standardx combines these initial fees with royalty fees. The combined amount is then deferred and recognized as franchise and other fees over the expected customer life, which typically aligns with the initial term of the franchise agreement. This means The Standardx does not recognize the entire initial fee as revenue immediately upon receipt.

For a prospective The Standardx franchisee, this accounting practice means that the initial franchise fee you pay will not be recognized as immediate revenue by The Standardx. Instead, it will be recognized gradually over the term of your franchise agreement. This approach aligns the revenue recognition with the period during which the franchisee benefits from the franchise, such as brand recognition and operational support.

This accounting method is a common practice in the franchise industry, as it reflects the ongoing nature of the franchisor-franchisee relationship and the continuous support and brand access provided by the franchisor. The Standardx's approach ensures that revenue recognition is tied to the delivery of services and benefits over the life of the franchise agreement, rather than just the initial payment.