As of December 31, 2023, what was the net amount of Benjamin Franklin Plumbing's customer relationships?
Benjamin_Franklin_Plumbing Franchise · 2025 FDDAnswer from 2025 FDD Document
| | Accumulated Estimated Amortization | | | | | | | | | Useful Life | | Gross Amount | | and Impairment | | Net Amount | Remaining Useful Life | | Trademarks(1) | 15-25 years | $ | 178,010 | $ | 36,252 | $ | 141,758 | 20.1 | | Franchise relationships | 15 years | | 351,207 | | 132,778 | | 218,429 | 9.4 | | Software(2) | 10 years | | 7,500 | | 6,356 | | 1,144 | 0.3 | | Proprietary processes | 10 years | | 2,449 | | 1,378 | | 1,071 | 4.6 | | Noncompetition agreements | 5 years | | 701 | | 583 | | 118 | 1.6 | | Intangible assets, net | | $ | 539,867 | $ | 177,347 | $ | 362,520 | |
- (1) Trademark impairment was $456.
- (2) Software impairment was $2,544.
| | | As of December 31, 2023 | | | | | | | |---------------------------|-------------|-------------------------|--------------|----|--------------|----|------------|----------------------------------| | | Estimated | | | | Accumulated | | | Weighted Average Remaining | | | Useful Life | | Gross Amount | | Amortization | | Net Amount | Useful Life | | Trademarks | 15-25 years | $ | 178,010 | $ | 28,685 | $ | 149,325 | 20.3 | | Franchise relationships | 15 years | | 351,207 | | 109,364 | | 241,843 | 10.3 | | Software | 10 years | | 7,500 | | 3,500 | | 4,000 | 5.3 | | Proprietary processes | 10 years | | 2,449 | | 1,133 | | 1,316 | 4.7 | | Noncompetition agreements | 5 years | | 701 | | 472 | | 229 | 2.6 | | Intangible assets, net | | $ | 539,867 | $ | 143,154 | $ | 396,713 | | Amortization expense was $31,193, $31,641 and $29,076, for the years ended December 31, 2024, 2023 2022. Impairment charges of $3,000 were recognized on Trademarks and Software intangible assets for the year ended December 31, 2024 (see Note 6). No impairment charges were recognized for the years ended December 31, 2023 and 2022.
Source: Item 22 — CONTRACTS (FDD pages 87–88)
What This Means (2025 FDD)
According to Benjamin Franklin Plumbing's 2025 Franchise Disclosure Document, the net amount of customer relationships as of December 31, 2023, was $25,823. These customer relationships have an estimated useful life of 4-5 years and a weighted average remaining useful life of 3 years.
This figure represents the value Benjamin Franklin Plumbing places on its connections with customers. The 'gross amount' of customer relationships was $48,479, but after accounting for accumulated amortization ($22,656), the net value is $25,823. Amortization is the process of gradually writing off the initial cost of an asset over its useful life. In this case, the customer relationships are being amortized over 4-5 years, reflecting the period over which they are expected to generate revenue.
For a prospective franchisee, understanding the value and lifespan of customer relationships is crucial. It highlights the importance of maintaining and nurturing these relationships to maximize their value. The relatively short useful life (4-5 years) suggests that ongoing efforts are needed to retain customers and build new relationships. The weighted average remaining useful life of 3 years indicates that, on average, existing customer relationships have been in place for about 1-2 years.
This information can help a franchisee assess the potential return on investment in customer acquisition and retention strategies. It also underscores the need for effective marketing and customer service practices to ensure the long-term success of the Benjamin Franklin Plumbing franchise.