What criteria does Basecamp Fitness use to define a lease as 'short-term'?
Basecamp_Fitness Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company leases various facilities. For any lease with an initial term in excess of 12 months, the related leased asset and liability are recognized on the consolidated balance sheets as operating leases at the inception of an agreement where it is determined that a lease exists. The Company has elected to exclude short-term leases for all classes of underlying assets from consolidated balance sheets recognition. A lease is considered to be short-term if it contains a lease term of 12 months or less. Lease expense related to short term leases is recognized on a straight-line basis over the term of the lease. The Company may enter into leases that contain both lease and nonlease components. The Company has elected to not combine lease and nonlease components for all asset classes.
Source: Item 23 — RECEIPTS (FDD pages 62–248)
What This Means (2025 FDD)
According to Basecamp Fitness's 2025 Franchise Disclosure Document, a lease is considered short-term if it has a lease term of 12 months or less. Basecamp Fitness has elected to exclude short-term leases for all classes of underlying assets from consolidated balance sheets recognition. Lease expenses related to short-term leases are recognized on a straight-line basis over the term of the lease.
For a prospective franchisee, this means that if you enter into a lease agreement for your Basecamp Fitness studio location that is 12 months or less, it will be classified as a short-term lease. This classification has implications for how Basecamp Fitness accounts for the lease in its financial statements. Specifically, these short-term leases are not included on the consolidated balance sheets.
The document also mentions that Basecamp Fitness may enter into leases that contain both lease and nonlease components, and they have elected not to combine these components for all asset classes. This could affect how the costs are allocated and accounted for, potentially influencing the franchisee's financial reporting and operational expenses.
Understanding the lease terms and their classification is crucial for managing the financial aspects of a Basecamp Fitness franchise. Franchisees should carefully review all lease agreements and consult with financial advisors to fully understand the implications of short-term versus long-term leases on their business.