What is included in the variable lease costs for Auntie Annes?
Auntie_Annes Franchise · 2024 FDDAnswer from 2024 FDD Document
Variable lease costs are primarily comprised of common area maintenance, real estate taxes, and contingent rent that is based upon a percentage of SBR sales.
Certain leases for SBRs require the payment of additional contingent rent if SBR sales exceed amounts set forth in the lease agreements. Both the contingent rent and the executory costs are considered variable lease costs and are excluded from the measurement of the lease liability.
| December 31, | December 25, | |
|---|---|---|
| For the fiscal years ended: | 2023 | 2022 |
| Variable lease cost | 3,478 | 2,196 |
Source: Item 23 — RECEIPTS (FDD pages 106–366)
What This Means (2024 FDD)
According to Auntie Anne's 2024 Franchise Disclosure Document, variable lease costs primarily consist of common area maintenance, real estate taxes, and contingent rent. The contingent rent is calculated as a percentage of the Auntie Anne's store, bakery, and restaurant (SBR) sales. These costs are important for prospective franchisees to understand as they can fluctuate based on the performance of their location and changes in property taxes or maintenance fees.
For Auntie Anne's, certain leases for SBRs require the payment of additional contingent rent if SBR sales exceed amounts set forth in the lease agreements. These contingent rent and executory costs are considered variable lease costs and are excluded from the measurement of the lease liability. This means that while the base rent might be fixed, the total lease expense can increase if the store performs well, adding a layer of complexity to financial forecasting.
In 2023, Auntie Anne's reported $3,478 in variable lease costs, compared to $2,196 in 2022. This shows that variable lease costs can change year to year. Understanding the components of variable lease costs and how they are calculated is crucial for any prospective Auntie Anne's franchisee to accurately project their potential expenses and profitability. Franchisees should carefully review lease agreements and understand the terms related to common area maintenance, real estate taxes, and contingent rent to avoid unexpected costs.