Are The Standardx's system-wide services considered a distinct performance obligation?

According to The Standardx's 2025 Franchise Disclosure Document, system-wide services are not considered a distinct performance obligation. The FDD specifies that The Standardx provides system-wide services on behalf of owners of managed and franchised properties. However, the promise to provide these system-wide services is not treated as a separate, distinct obligation. Instead, it is considered connected to the access to The Standardx's intellectual property (IP). Therefore, the commitment to deliver system-wide services is combined with the access to The Standardx's IP to form a single performance obligation.

For a prospective franchisee, this means that the fees paid for system-wide services are integrated with the fees for accessing The Standardx's brand names and systems. The Standardx accounts for these services under a fund model, where franchisees are invoiced a system-wide assessment fee monthly. The revenues from these fees are recognized over time as services are provided. The Standardx has discretion over how these program revenues are spent and intends to manage the system-wide programs to break even, without earning a profit on these services.

This accounting approach has implications for how The Standardx recognizes revenue and manages its financial reporting. Any difference between the revenues received from franchisees and the expenses incurred to operate the system-wide programs will impact The Standardx's net income. Franchisees should be aware that while they pay for these services, The Standardx aims to provide them at cost, without a profit margin. This arrangement ensures that the fees are used to support the system and benefit all franchisees, rather than contributing directly to The Standardx's profits.