How does The Standardx use Adjusted EBITDA to allocate resources?
The_Standardx Franchise · 2025 FDDAnswer from 2025 FDD Document
Our CODM evaluates performance based on segment revenues and Adjusted EBITDA. Our CODM uses these measures to evaluate trends and assess segment operating performance as compared to our prior-period and forecasted results as well as our industry and competitors in order to determine how to allocate resources to each segment. Significant segment expenses include Adjusted general and administrative expenses, owned and leased expenses, and distribution expenses. Our CODM does not evaluate our operating segments using discrete asset information.
We define Adjusted EBITDA as net income (loss) attributable to Hyatt Hotels Corporation plus net income (loss) attributable to noncontrolling interests and our pro rata share of unconsolidated owned and leased hospitality ventures' Adjusted EBITDA, primarily based on our ownership percentage of each owned and leased venture, adjusted to exclude amortization of management and hotel services agreement and franchise agreement assets ("key money assets") and performance cure payments, which constitute payments to customers ("Contra revenue"); revenues for reimbursed costs; stock-based compensation expense; transaction and integration costs; depreciation and amortization; reimbursed costs that we intend to recover over the long term; equity earnings (losses) from unconsolidated hospitality ventures; interest expense; gains (losses) on sales of real estate and other; asset impairments; other income (loss), net; and benefit (provision) for income taxes.
Source: Item 1 — Financial Statements. (FDD pages 156–187)
What This Means (2025 FDD)
According to The Standardx's 2025 Franchise Disclosure Document, the company's Chief Operating Decision Maker (CODM) utilizes segment revenues and Adjusted EBITDA to make decisions about resource allocation. The CODM uses these metrics to evaluate the operating performance of different segments, comparing current results to prior periods, forecasts, and industry benchmarks, including competitors. This analysis helps The Standardx determine how to best allocate resources across its various segments.
Significant expenses considered in this evaluation include adjusted general and administrative expenses, owned and leased expenses, and distribution expenses. However, the CODM does not use discrete asset information to evaluate the operating segments. Adjusted EBITDA is defined as net income (loss) attributable to Hyatt Hotels Corporation plus net income (loss) attributable to noncontrolling interests and our pro rata share of unconsolidated owned and leased hospitality ventures' Adjusted EBITDA, primarily based on our ownership percentage of each owned and leased venture, adjusted to exclude amortization of management and hotel services agreement and franchise agreement assets ("key money assets") and performance cure payments, which constitute payments to customers ("Contra revenue"); revenues for reimbursed costs; stock-based compensation expense; transaction and integration costs; depreciation and amortization; reimbursed costs that we intend to recover over the long term; equity earnings (losses) from unconsolidated hospitality ventures; interest expense; gains (losses) on sales of real estate and other; asset impairments; other income (loss), net; and benefit (provision) for income taxes.
For a prospective franchisee, this means that The Standardx's resource allocation decisions are heavily influenced by the revenue and profitability (as measured by Adjusted EBITDA) of different segments within the company. While the FDD provides a definition of Adjusted EBITDA, it does not specify the exact weighting or formula used to determine resource allocation. Understanding how these metrics are applied in practice would be a valuable area of inquiry for potential franchisees.
It's important to note that Adjusted EBITDA is a non-GAAP financial measure, and its calculation can vary between companies. Therefore, prospective franchisees should carefully review The Standardx's definition of Adjusted EBITDA and understand how it differs from standard accounting practices. Additionally, franchisees may want to inquire about the specific thresholds or benchmarks used to trigger resource allocation decisions, as this could impact the support and investment they receive from the franchisor.