What method does Bojangles use to compute depreciation for property and equipment?
Bojangles Franchise · 2025 FDDAnswer from 2025 FDD Document
Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Finance leases are recorded at the lesser of the estimated fair value or the present value of amounts due under the lease. The Company reviews for impairment whenever events or circumstances indicate that carrying amounts may not be recoverable through future undiscounted cash flows. Impairment charges result primarily from the carrying value of Company-operated restaurant assets exceeding the estimated fair market value. The Company recognized property and equipment impairment charges of $787 under Restaurant closures and refranchising costs, net of gains and related asset write-downs in the consolidated statement of operations for the year ended December 29, 2024. No property and equipment impairment charges were recorded during the years ended December 31, 2023 and December 25, 2022.
Provisions for depreciation are made using the straight-line method over an asset's estimated useful life: up to 40 years for buildings; up to 5 years for furniture, fixtures and equipment; up to 5 years for computer hardware and software; and in the case of leasehold improvements and finance lease assets, the lesser of the economic life of the asset or the lease term.
Source: Item 22 — CONTRACTS (FDD page 82)
What This Means (2025 FDD)
According to Bojangles's 2025 Franchise Disclosure Document, the company uses the straight-line method to compute depreciation for property and equipment over the estimated useful lives of the assets. The estimated useful lives are up to 40 years for buildings, up to 5 years for furniture, fixtures, and equipment, and up to 5 years for computer hardware and software. For leasehold improvements and finance lease assets, depreciation is calculated over the lesser of the economic life of the asset or the lease term.
This means that Bojangles systematically allocates the cost of its assets evenly over their useful lives. For a franchisee, understanding these depreciation methods is important for financial planning and assessing the long-term value of assets. The longer the estimated useful life of an asset, the smaller the annual depreciation expense, which can impact the franchisee's profitability and tax obligations.
Furthermore, Bojangles reviews assets for impairment whenever events or circumstances suggest that the carrying amounts may not be recoverable through future undiscounted cash flows. If the carrying value of an asset exceeds its fair value, an impairment charge is recognized. For the year ended December 29, 2024, Bojangles recognized property and equipment impairment charges of $787,000 under Restaurant closures and refranchising costs. No such charges were recorded during the years ended December 31, 2023 and December 25, 2022. This indicates that Bojangles actively monitors the value of its assets and adjusts their carrying value when necessary, which can affect the company's financial statements and potentially influence investment decisions.
Prospective franchisees should be aware of these accounting practices, as they can affect the financial performance of their Bojangles restaurant. Understanding how depreciation and impairment are calculated can help franchisees make informed decisions about asset management and investment strategies.