How does 7 Brew account for leases with an initial term of 12 months or less?

According to 7 Brew's 2025 Franchise Disclosure Document, the company has elected not to record leases with an initial term of 12 months or less on the balance sheets. Instead, 7 Brew recognizes the lease expense for these short-term leases on a straight-line basis over the lease term. This accounting treatment simplifies the financial reporting for these leases, as it avoids the recognition of right-of-use (ROU) assets and lease liabilities on the balance sheet.

For a prospective 7 Brew franchisee, this means that if they enter into a lease agreement for a property with a term of 12 months or less, the expense will be recognized evenly over the lease term. This can provide a more predictable and consistent expense profile for these short-term leases. It also reduces the complexity of the franchisee's balance sheet, as these leases are not recorded as assets or liabilities.

This approach is in line with standard accounting practices, which often provide simplified treatments for short-term leases due to their relatively immaterial impact on the financial statements. Franchisees should be aware of this accounting policy when evaluating potential locations and negotiating lease terms, as it can affect their reported expenses and financial ratios.