Under what condition are the notes payable for the acquisition of franchise rights due for Boulder Designs?
Boulder_Designs Franchise · 2025 FDDAnswer from 2025 FDD Document
greements in the amount of $563,824 and $576,824, respectively, consist of franchise rights previously sold by the Company that were repurchased due to various circumstances with the intent to resale. An impairment loss of $28,000, $30,000, and $30,000 was charged to operations during 2024, 2023, and 2022, respectively.
(4) Notes Payable
Notes payable at December 31, 2024 and 2023 includes three notes payable on demand with an aggregate balance of $248,000 and $255,000, respectively. One note bears interest at a rate of 4% and the other two notes do not have a stated interest rate.
(5) Long-Term Debt
Long-term debt at December 31, 2024 and 2023 consists of the following:
| 2024 | 2023 |
|---|
Source: Item 23 — RECEIPT (FDD pages 50–217)
What This Means (2025 FDD)
According to Boulder Designs' 2025 Franchise Disclosure Document, notes payable for the acquisition of franchise rights are due at the time the franchise rights are resold. These notes do not bear interest. As of December 31, 2024, the total amount of these notes payable was $331,730, while on December 31, 2023, the amount was $275,480.
This arrangement means that a Boulder Designs franchisee who finances the acquisition of their franchise rights through notes payable will not have to repay the loan until they resell their franchise. This can be beneficial for franchisees as it aligns the repayment with a liquidity event (the sale of the franchise). However, it also means that the franchisee will not be building equity in the business until the resale occurs, as the proceeds will first be used to pay off the notes.
It is important for prospective Boulder Designs franchisees to fully understand the terms of these notes, including any potential risks associated with reselling the franchise. For example, if the resale value of the franchise is less than the outstanding balance of the notes, the franchisee may still be responsible for the difference. Additionally, franchisees should consider the implications of not accruing equity in the business until the resale occurs, as this could impact their long-term financial planning.