Under what circumstances does Bojangles reassess lease classifications subsequent to the commencement of the lease?
Bojangles Franchise · 2025 FDDAnswer from 2025 FDD Document
We determine if an arrangement is a lease at inception or modification of a contract and classify each lease as either an operating or finance lease at commencement. Leases that are economically similar to the purchase of assets are generally classified as finance leases; otherwise, the leases are classified as operating leases. The Company only reassesses lease classifications subsequent to commencement upon a change in the expected lease term or modification of the contract. Finance and operating lease assets represent the Company's right to use an underlying asset for the lease term, and lease obligations represent the Company's obligation to make lease payments arising from the lease. These assets and obligations are recognized at the lease commencement date based on the present value of lease payments, net of incentives, over the lease term. The Company's lease terms include option periods to extend the lease when it is reasonably certain that those options will be exercised. Options to extend have varying rates and terms for each lease.
Source: Item 22 — CONTRACTS (FDD page 82)
What This Means (2025 FDD)
According to Bojangles's 2025 Franchise Disclosure Document, Bojangles will determine if an arrangement is a lease at the start of the contract, or if there are modifications to the contract. At the beginning of the lease, Bojangles will classify each lease as either an operating or finance lease.
Bojangles typically classifies leases that are economically similar to purchasing assets as finance leases. Otherwise, the leases are classified as operating leases. Subsequent to the commencement of the lease, Bojangles will only reassess lease classifications if there is a change in the expected lease term or a modification of the contract.
Finance and operating lease assets represent Bojangles's right to use an underlying asset for the lease term, and lease obligations represent their obligation to make lease payments arising from the lease. These assets and obligations are recognized at the lease commencement date based on the present value of lease payments, net of incentives, over the lease term. The company's lease terms include option periods to extend the lease when it is reasonably certain that those options will be exercised. Options to extend have varying rates and terms for each lease.