For Bumble Roofing, what is the present value discount applied to the 'Thereafter' projected revenue?
Bumble_Roofing Franchise · 2025 FDDAnswer from 2025 FDD Document
future minimum annual lease payments for all leases for the years ending September 30:
| 2025 | $ 1,007,629 |
|---|---|
| 2026 | 1,106,558 |
| 2027 | 851,811 |
| 2028 | 873,841 |
| 2029 | 896,459 |
| Thereafter | 1,719,868 6,456,166 |
| Less: present value discount | (814,754) $ 5,641,412 |
NOTE 9 – RETIREMENT PLAN
The Company has a salary deferral plan under Section 401(k) of the Internal Revenue Code. The plan allows eligible employees to defer a portion of their compensation ranging from 1% to 15%. Such deferrals accumulate on a tax-deferred basis until the employee withdraws the funds. The Company, at its option, may match a portion of the employees' contribution.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 53)
What This Means (2025 FDD)
According to Bumble Roofing's 2025 Franchise Disclosure Document, a present value discount of $814,754 is applied to the 'Thereafter' projected revenue. The gross operating lease liabilities are listed as $6,456,166, which is then reduced by the present value discount to arrive at a present value of operating lease liabilities of $5,641,412. After deducting the current portion of operating lease liabilities, which is $965,045, the long-term operating lease liabilities are $4,676,367.
This present value discount is a standard accounting practice to reflect the time value of money, meaning that money available today is worth more than the same amount in the future due to its potential earning capacity. By applying this discount, Bumble Roofing is adjusting the future revenue stream to its equivalent value in present-day terms. This is particularly relevant for long-term financial projections, as it provides a more accurate representation of the actual value of future income.
For a prospective Bumble Roofing franchisee, understanding the present value discount is crucial for assessing the long-term financial viability of the franchise. It highlights the importance of not just looking at the total projected revenue, but also considering the discounted value, which accounts for the risks and uncertainties associated with future earnings. This information can help franchisees make informed decisions about their investment and financial planning.