What does 'Depreciation and amortization' expense consist of for Benihana?

According to Benihana's 2024 Franchise Disclosure Document, depreciation and amortization expense primarily includes charges related to the depreciation of fixed assets. These fixed assets encompass leasehold improvements, equipment, furniture, and fixtures. Additionally, the expense covers the amortization of intangible assets specifically related to the Kona Grill tradename.

For a Benihana franchisee, understanding these components is crucial for financial planning and assessing the profitability of the franchise. Depreciation reflects the reduction in value of tangible assets over time due to wear and tear or obsolescence, while amortization accounts for the decline in value of intangible assets like the Kona Grill tradename. These non-cash expenses impact the reported net income and are important to consider when evaluating the overall financial health of the business.

The document also specifies that computers, equipment, furniture, and fixtures are depreciated over their useful lives, ranging from three to fifteen years. Leasehold improvements are depreciated over the shorter period of their estimated useful lives or the remaining term of the associated lease. The Kona Grill trade name and other finite-lived intangible assets are amortized using the straight-line method over their estimated useful life of 10 years.

In 2023, Benihana's depreciation and amortization expense increased by $3.6 million, reaching $15.7 million, compared to $12.1 million in 2022. This increase was mainly due to the opening of eight new owned venues since August 2022 and capital expenditures aimed at maintaining and enhancing the guest experience in the restaurants. These figures highlight the ongoing investment in both new locations and existing facilities, which prospective franchisees should consider as part of their financial projections.