How does Beef O Bradys amortize franchise rights?
Beef_O_Bradys Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company has financial or nonfinancial assets and financial or nonfinancial liabilities that are required to be measured at fair value on a recurring basis. The Company's impairment test of the trademarks or trade names, franchise rights, and liquor license intangible assets, under ASC 350, Intangibles-Goodwill and Other, requires the determination of their fair value.
ASC 820-10, Fair Value Measurement, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the reporting date. The guidance establishes consistency and comparability by providing a fair value hierarchy that prioritizes the inputs to valuation techniques into three broad levels:
- Level 1 inputs utilize quoted prices for identical assets in active markets that the Company has the ability to access,
- Level 2 inputs are based on other observable market data, such as quoted prices for similar assets and liabilities, and inputs other than quoted prices that are observable, such as interest rates and yield curves,
- Level 3 inputs are developed by management reflecting the Company's assumptions and include situations where there is little or no market activity for the asset or liability.
Source: Item 23 — RECEIPTS. (FDD pages 66–330)
What This Means (2025 FDD)
According to the 2025 Beef O Bradys FDD, the company conducts impairment tests on trademarks, trade names, franchise rights, and liquor license intangible assets, as per ASC 350, Intangibles-Goodwill and Other, to determine their fair value. Fair value is defined as the price to sell an asset or transfer a liability in an orderly transaction between market participants at the reporting date. This involves using a fair value hierarchy that prioritizes inputs to valuation techniques into three levels.
Level 1 inputs are based on quoted prices for identical assets in active markets. Level 2 inputs use observable market data, such as quoted prices for similar assets and liabilities, interest rates, and yield curves. Level 3 inputs are developed by Beef O Bradys' management and reflect the company's assumptions, particularly when there is little or no market activity for the asset or liability.
This accounting approach means that Beef O Bradys periodically assesses the value of its intangible assets, including franchise rights, and adjusts their value based on market conditions and internal assessments. For a franchisee, this doesn't directly impact their day-to-day operations. However, it's important to understand that the value of the franchise rights, as reflected in Beef O Bradys' financial statements, can fluctuate based on these fair value measurements.