What is the net present value of the minimum lease payments for Best Western franchisees?
Best_Western Franchise · 2025 FDDAnswer from 2025 FDD Document
iable lease cost | 50 | | Total lease costs | $ 1,008 |
For operating leases, the weighted average remaining lease term is 2.3 years and the weighted average discount rate is 3.42%.
November 30, 2023
Minimum future rentals on non-cancelable operating leases, having an initial or remaining term in excess of one year as of November 30, 2023 were as follows (in thousands):
| Years ending |
|---|
| November 30, | Operating Leases | ||
|---|---|---|---|
| 2024 | $ 891 | ||
| 2025 | 607 | ||
| 2026 | 109 | ||
| 2027 | 82 | ||
| 2028 and thereafter | 19 | ||
| Total minimum lease payments | 1,708 | ||
| Less interest | 69 | ||
| Net present value of minimum lease payments | $ 1,639 |
Accounting for leases under ASC 840 for the year ended November 30, 2022
The Company leases certain office space, vehicles, and equipment under various operating leases, which expire on various dates through March 2028. Rental expenses on operating leases are recorded on a straight-line basis. Rental expense for operating leases was $1.5 million for the year ended November 30, 2022.
Source: Item 23 — Receipts (FDD pages 108–413)
What This Means (2025 FDD)
According to Best Western's 2025 Franchise Disclosure Document, there are two different values provided for the net present value of minimum lease payments. One excerpt from Item 23 states that the net present value of minimum lease payments is $1,639. This figure is calculated after deducting interest of $69 from the total minimum lease payments of $1,708. The lease payment obligations are broken down by year, with $891 due in 2024, $607 in 2025, $109 in 2026, $82 in 2027, and $19 in 2028 and thereafter. These figures are expressed in thousands.
Another excerpt from Item 23 states that the net present value of minimum lease payments is $1,501. This figure is calculated after deducting interest of $84 from the total minimum lease payments of $1,585. The lease payment obligations are broken down by year, with $731 due in 2025, $333 in 2026, $264 in 2027, $207 in 2028, and $50 in 2029 and thereafter. These figures are expressed in thousands.
It is important for a prospective Best Western franchisee to clarify with the franchisor the discrepancy in these figures and understand which set of numbers applies to their specific situation. Understanding the terms and conditions of any lease agreements is crucial for assessing the financial obligations and potential profitability of the franchise.