What is Benihana's estimated aggregate amortization expense, in millions of dollars, for each of the five succeeding fiscal years?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
depreciation are removed from the accounts, and any gain or loss on retirements is reflected in operating income in the year of disposition.
Computers and equipment as well as furniture and fixtures are depreciated over their useful lives from three to fifteen years. Leasehold improvements are depreciated over the shorter of their estimated useful lives or the remaining term of the associated lease. Lease terms begin on the date the Company takes possession under the lease and include option periods where failure to exercise such options would result in an economic penalty.
Other Assets
Other assets include liquor license acquisition costs and costs to fulfill obligations under the Co
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, the company's estimated aggregate amortization expense for each of the five succeeding fiscal years is a nominal amount annually. This projection is based on the amortization of finite-lived intangible assets, which are amortized using the straight-line method over their estimated useful life of 10 years. As of December 31, 2023, the gross carrying amount of the Kona Grill trade name intangible was $17.4 million, while the gross carrying amount of other finite-lived intangible assets was $0.1 million. The amortization expense for the year ending December 31, 2023, was nominal, and $0.2 million for the year ending December 31, 2022.
For a prospective Benihana franchisee, understanding the amortization expense is crucial for financial planning and forecasting. Amortization represents the systematic reduction of the book value of intangible assets over their useful life, impacting the reported profitability of the business. While the estimated amortization expense is nominal, it is essential to consider how these expenses might affect the overall financial performance of the franchise.
It's important to note that the "Kona Grill" trade name is considered an indefinite-lived intangible asset. This means that Benihana does not amortize this particular asset unless its value becomes impaired. The company reviews long-lived assets, including property, equipment, and right-of-use assets, for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be fully recoverable. This evaluation is typically performed at the individual restaurant level, as it is considered the lowest level of identifiable cash flows.
Prospective franchisees should inquire about the specific intangible assets associated with their franchise and understand the policies and assumptions used to determine their useful lives and amortization methods. Additionally, it is advisable to seek clarification on the potential for impairment charges and how these charges could impact the financial statements of the franchise.