What is the depreciation method used by Big Apple Bagels for calculating the depreciation of property and equipment?
Big_Apple_Bagels Franchise · 2025 FDDAnswer from 2025 FDD Document
Property and equipment and leasehold improvements are stated at cost less accumulated depreciation and amortization. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Estimated useful lives are 3-7 years for machinery, equipment and fixtures and 10 years or term of lease, if less, for leasehold improvements. Maintenance and repairs are charged to expense as incurred. Expenditures that materially extend the useful lives of assets are capitalized.
Source: Item 23 — RECEIPTS (FDD pages 87–319)
What This Means (2025 FDD)
According to Big Apple Bagels' 2025 Franchise Disclosure Document, the company uses the straight-line method to calculate depreciation for property and equipment. This method evenly distributes the cost of an asset over its estimated useful life.
For Big Apple Bagels, the estimated useful lives of assets range from 3 to 7 years for machinery, equipment, and fixtures. Leasehold improvements are depreciated over a period of 10 years or the term of the lease, whichever is shorter. Leasehold improvements are changes or upgrades made to a leased property.
Maintenance and repairs are expensed as they are incurred, meaning they are deducted from revenue in the period they happen. Expenditures that materially extend the useful lives of assets are capitalized, meaning they are added to the asset's cost and depreciated over the extended life. This accounting practice is standard across many industries, including franchising, as it provides a consistent and predictable way to account for the decline in value of assets over time.