What valuation techniques might Bojangles use to determine the fair value of an asset when assessing impairment?
Bojangles Franchise · 2025 FDDAnswer from 2025 FDD Document
If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques, including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary.
Source: Item 22 — CONTRACTS (FDD page 82)
What This Means (2025 FDD)
According to Bojangles's 2025 Franchise Disclosure Document, when assessing the impairment of long-lived assets, Bojangles may employ various valuation techniques to determine the fair value of an asset. These techniques include discounted cash flow models, which project the future cash flows an asset is expected to generate and then discount them to their present value. This method is common in assessing the value of income-producing assets.
Another technique Bojangles might use is referencing quoted market values, which involves looking at prices of similar assets in the market. This approach is most applicable when there is an active market for the type of asset being evaluated. Additionally, Bojangles may use third-party independent appraisals, which involve hiring an external appraiser to provide an unbiased opinion of the asset's fair value. This is often used for real estate or specialized equipment where market values are not readily available.
These valuation techniques are considered as necessary to accurately determine the fair value of assets when testing for impairment. The choice of technique depends on the nature of the asset and the availability of reliable data. For a prospective franchisee, understanding these valuation methods is important because it provides insight into how Bojangles manages and assesses the value of its assets, which can impact the financial health and stability of the franchise system.