How does Bath Tune Up account for leases with an initial term of 12 months or less?
Bath_Tune_Up Franchise · 2025 FDDAnswer from 2025 FDD Document
sury rate at the lease commencement date for the duration of the remaining lease term, unless the rate is implicit in the contract, then the Company uses the implicit rate to discount the present value of the future minimum lease payments.
The Company's lease commitments include real estate leases. Total non-allocated lease expense was $143,259 for the year ended December 31, 2022. The
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 51–52)
What This Means (2025 FDD)
According to Bath Tune Up's 2025 Franchise Disclosure Document, leases with an initial term of 12 months or less are not recorded on the balance sheet. Instead, Bath Tune Up recognizes the lease expense for these leases on a straight-line basis over the lease term.
This means that if a Bath Tune Up franchisee enters into a short-term lease agreement (12 months or less) for, say, a storage unit, the financial impact is accounted for differently than a longer-term lease. Instead of showing the lease as an asset and liability on the balance sheet, the expense is simply spread out evenly over the duration of the lease.
For a prospective franchisee, this accounting treatment could simplify the financial reporting for short-term leases. It's important to note that this applies specifically to leases with an initial term of 12 months or less; longer-term leases are treated differently under accounting standards, with assets and liabilities recognized on the balance sheet.