How does Benihana measure the recoverability of its restaurant assets?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
evant facts and circumstances include, among others, significant underperformance relative to historical or projected future operating results, significant changes in the manner of use of the acquired assets or the strategy for the overall business, and significant negative industry or economic trends. Recoverability of restaurant assets is measured by a comparison of the carrying amount of an individual restaurant's assets to the estimated identifiable undiscounted future cash flows expected to be generated by those restaurant assets. This process requires the use of estimates and assumptions, which are subject to a high degree of judgment. If the carrying amount of an individual restaurant's assets exceeds its estimated undiscounted future cash flows an impairment charge is recognized as the amount by which the carrying amount of the asset exceeds its fair value. The estimated fair value is determined for these assets in accordance with ASC 820.
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, the recoverability of restaurant assets is evaluated at the individual restaurant level. Benihana compares the carrying amount of a restaurant's assets to the estimated identifiable undiscounted future cash flows expected to be generated by those assets. This process involves the use of estimates and assumptions, requiring a high degree of judgment. These cash flows exclude operating lease payments.
If the carrying amount of a restaurant's assets exceeds its estimated undiscounted future cash flows, Benihana recognizes an impairment charge. This charge is the amount by which the carrying amount of the asset exceeds its fair value. The estimated fair value is determined according to ASC 820, Fair Value Measurement.
For example, as of December 31, 2023, Benihana's property and equipment, net of accumulated depreciation, totaled $139.9 million, and its operating lease right-of-use assets were $95.1 million. For the year ended December 31, 2023, Benihana did not recognize any impairment loss related to long-lived assets. This indicates that, in Benihana's assessment, the carrying value of its restaurant assets did not exceed their estimated future cash flows during that period.