What depreciation method does Bhc primarily use for depreciable property, and what is the approximate useful life assumed for the property?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
| | Gross Profit | 1,023,504 | | Operating Expenses | 2,481,699 | | Loss from Operations | (1,458,195) | | Other Income (Expenses): | | | Interest income | 62 | | Interest expense | (41,602) | | Other expense, net | (353) | | Loss on inventory | (27,257) | | Total Other Income (Expenses) | (69,150) | | Loss before Income Tax | (1,527,345) | | Income Tax Provision | (2,400) | | Net Loss | (1,529,745) | | Other Comprehensive Income | 0 | | Total Comprehensive Loss | $ (1,529,745) |
YEAR ENDED DECEMBER 31, 2024
| Capital Contribution | 760,000 |
|---|---|
| Net Loss | (1,529,745) $ 839,898 |
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2024
| Net loss | $ (1,529,745) |
|---|---|
| Adjustments to reconcile net loss to net cash used by operating activities: | |
| Depreciation | 237,303 |
| Amortization of right-of-use assets | 155,509 |
| (Increase) decrease in current assets: | |
| Accounts receivable | (139,178) |
| Inventories | 46,748 |
| Prepaid expenses | 13,128 |
| Increase (decrease) in current liabilities: | |
| Accounts payable | 262,683 |
| Payroll and payroll tax payable | 52,122 |
| Sales tax payable | 1,629 |
| Deferred revenue | 384,010 |
| Net Cash Used by Operating Activities | (515,791) |
| Investing Activities: | |
| Acquisition of property and equipment | (379,598) |
| Increase in deposits | (58,000) |
| Net Cash Used by Investing Activities | (437,598) |
| Financing Activities: | |
| Receipt of customer deposit | 100,000 |
| Payment of principal portion of lease obligations | (143,197) |
| Capital contribution | 760,000 |
| Net Cash Provided by Financing Activities | 716,803 |
| Net Decrease in Cash | (236,586) |
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
Based on the 2025 FDD, the information provided does not specify the exact depreciation method used by Bhc for its depreciable property or the estimated useful life of those assets. However, the FDD does include a line item for depreciation expense.
Specifically, the consolidated financial statements include a depreciation expense of $237,303. Additionally, the assets listed include leasehold improvements of $1,425,433, furniture and fixtures of $45,874, machinery and equipment of $4,709, and transportation equipment of $51,789. The accumulated depreciation for these assets is listed as $365,313.
To make an informed decision, a prospective Bhc franchisee should ask the franchisor for details on the depreciation methods used for different asset classes and the estimated useful lives of those assets. Understanding these accounting practices is essential for projecting future earnings and managing the financial aspects of the franchise.