Does the cost of sales for Aplus include depreciation of property and equipment?

According to Aplus's 2024 Franchise Disclosure Document, the cost of sales does not include depreciation of property and equipment. The FDD specifies that Aplus includes all costs incurred to acquire fuel and merchandise, including purchasing, storing, and transporting inventory, in its cost of sales. However, depreciation of property and equipment is excluded because the amounts attributed to cost of sales would not be significant. Instead, depreciation is classified within operating expenses in the consolidated statements of operations and comprehensive income.

For a prospective Aplus franchisee, this means that the cost of sales reported in their financial statements will not reflect the depreciation of assets like buildings, equipment, and storage tanks. These depreciation expenses will be accounted for separately under operating expenses. This distinction is important for understanding the different components of Aplus's expenses and how they impact profitability.

This accounting treatment is not uncommon, as depreciation is often considered an operating expense rather than a direct cost of goods sold. By classifying depreciation as an operating expense, Aplus provides a clearer picture of the direct costs associated with acquiring and selling fuel and merchandise, which can help franchisees better manage their day-to-day operations and pricing strategies.