What was the reported value of leasehold improvements for Brueggers Bagels as of December 31, 2024?
Brueggers_Bagels Franchise · 2025 FDDAnswer from 2025 FDD Document
ded December 31, 2024, December 26, 2023, and December 27, 2022, respectively. These costs are amortized over the initial lease term of the underlying leases.
Asset Retirement Obligations
The Company has certain asset retirement obligations, primarily associated with leasehold improvements, whereby at the end of a lease, the Company is contractually obligated to remove such leasehold improvements in order to comply with the lease agreement. At the inception of a lease with such conditions, the Company records an asset retirement obligation liability and a corresponding capital asset in an amount equal to the estimated fair value of the obligation. The liability is estimated based on a number of assumptions requiring management's judgment, including store closing costs and discount rates, and is accreted to its projected future value over time. The capitalized asset is depreciated using the estimated useful life for depreciation of leasehold improvement assets. Upon satisfaction of the asset retirement obligation conditions, any difference between the recorded asset retirement obligation liability and the actual retirement costs incurred is recognized as an operating gain or loss in the Company's financial statements in the period incurred. There were no net operating gains recorded for the fiscal years ended December 31, 2024 and December 26, 2023, and December 27, 2022, respectively.
1. Business and Summary of Significant Accounting Policies (continued)
Asset Retirement Obligations (continued)
Total asset retirement obligation expense was less than $0.1 million for each of the fiscal years ended December 31, 2024, December 26, 2023, and December 27 2022, and is included in costs of sales and related occupancy costs and depreciation and amortization. As of December 31, 2024 and December 26, 2023, the Company's net asset retirement obligation asset included in property, plant and equipment, net of accumulated depreciation and amortization was less than $0.1 million for each fiscal year, while the Company's net asset retirement obligation liability was equal to $0.1 million and $0.3 million for the fiscal years ended December 31, 2024 and December 26, 2023.
Operating Leases and Rent Expense
The Company leases all coffeehouse and bagel bakery locations as well as its corporate office spaces under operating leases. The Company also has equipment leases that qualify as operating leases. The Company determines if an arrangement is a lease at inception.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 61)
What This Means (2025 FDD)
According to Brueggers Bagels's 2025 Franchise Disclosure Document, the company addresses leasehold improvements in the context of asset retirement obligations. These obligations relate to the contractual requirement to remove leasehold improvements at the end of a lease. The company records an asset retirement obligation liability and a corresponding capital asset, which is then depreciated over the useful life of the leasehold improvements.
As of December 31, 2024, the company's net asset retirement obligation asset, which includes leasehold improvements, was less than $0.1 million, net of accumulated depreciation and amortization. The company also recorded impairment charges of $0.1 million for leasehold improvements during the fiscal year ended December 31, 2024, which was recorded as depreciation and amortization expense.
Prospective franchisees should note that these figures reflect the company's overall financial reporting and that individual store-level financials may vary. Understanding the specific lease terms and potential retirement obligations for a particular location is crucial. Additionally, franchisees should inquire about the typical lifespan and depreciation methods used for leasehold improvements to accurately project their own potential expenses and asset values.