How is lease expense recognized on the financial statements for Body Brain Center?
Body_Brain_Center Franchise · 2025 FDDAnswer from 2025 FDD Document
software service agreement with Body & Brain Yoga and Health Centers, Inc. (Provider). Provider is engaged in the business of providing yoga and wellness classes and programs, and is experienced in developing and maintaining online software specifically designed for the yoga and wellness industry. This agreement was for a term of one year and continues until terminated by the mutual consent of the parties. Under the terms of this agreement, the Company pays to Provider $400 per month. D
Source: Item 23 — RECEIPT (FDD pages 43–178)
What This Means (2025 FDD)
According to Body Brain Center's 2025 Franchise Disclosure Document, the company has a premises use agreement with Body & Brain Yoga and Health Centers, Inc. The agreement is on a month-to-month basis and can be terminated as provided in the agreement. Under the terms of this agreement, Body Brain Center has the right to use a portion of the premises, subject to the terms and provisions outlined. Rent expense under this agreement amounted to $9,600 for both the years ended December 31, 2024 and 2023.
This means that Body Brain Center recognizes rent expense as it is incurred each month. The consistent rent expense of $9,600 per year for both 2024 and 2023 suggests a stable, predictable cost for the use of the premises.
For a prospective franchisee, this indicates that Body Brain Center's lease arrangements are currently structured on a short-term basis, providing flexibility but potentially lacking long-term security regarding the premises. The related-party nature of the lease (with Body & Brain Yoga and Health Centers, Inc.) is also important to note, as it could be subject to different considerations than an arm's-length transaction with an independent landlord. A potential franchisee should inquire about the typical lease terms offered to franchisees and whether these terms are consistent with standard commercial leasing practices in their area.
It is important to note that the FDD does not provide details on the accounting policies related to lease agreements. A prospective franchisee should seek clarification from Body Brain Center regarding the specific accounting methods used for leases, especially if the franchisee anticipates entering into longer-term or more complex lease arrangements.