What was the weighted average discount rate for Benihana's operating leases as of December 31, 2021?
Benihana Franchise · 2024 FDDAnswer from 2024 FDD Document
fied as of December 31, 2021 were as follows for each year ending (in thousands):
| 2022 | $ 90 |
|---|---|
| 2023 | 79 |
| 2024 | 45 |
| 2025 | 44 |
| 2026 | 37 |
| Thereafter | 93 |
| Total future estimated deferred license revenue | $ 388 |
Note 9 – Leases
The components of lease expense for the period were as follows (in thousands):
| December 31, | December 31, | |||
|---|---|---|---|---|
| 2021 | 2020 | |||
| Lease cost |
Source: Item 22 — CONTRACTS (FDD pages 73–74)
What This Means (2024 FDD)
According to Benihana's 2024 Franchise Disclosure Document, the weighted average discount rate for operating leases as of December 31, 2021, was 8.43%. This rate reflects the average interest rate used to discount the future lease payments back to their present value for Benihana's operating leases.
For a prospective Benihana franchisee, understanding the discount rate is crucial because it affects how the lease liabilities are valued on the balance sheet. A higher discount rate would result in a lower present value of lease liabilities, while a lower rate would increase the present value. This can impact the franchisee's financial ratios and overall financial health assessment.
The FDD also indicates that the weighted average remaining lease term for operating leases was 13 years as of December 31, 2021. This long lease term, combined with the discount rate, provides insight into the long-term financial obligations Benihana has for its restaurant locations. Franchisees should consider these factors when evaluating the financial commitments associated with leasing a Benihana restaurant location.