What was the amount of contingent rents received by Burger King as of December 31, 2023?
Burger_King Franchise · 2025 FDDAnswer from 2025 FDD Document
n annual sales exceed specific levels. Lessees typically bear the cost of maintenance, insurance and property taxes.
We lease land, buildings, equipment, office space and warehouse space from third parties. Land and building leases generally have an initial term of 10 to 20 years, while land-only lease terms can extend longer, and most leases provide for fixed monthly payments. Many of these leases provide for future rent escalations and renewal options. Certain leases also include prov
Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 109–124)
What This Means (2025 FDD)
According to Burger King's 2025 Franchise Disclosure Document, the amount of contingent rents to be received as of December 31, 2023, was $4. This figure represents future contingent rents, not rents already received. These rents are part of the broader category of 'Future rents to be received' from properties leased to franchisees. The document also lists other components of future rents, such as future minimum lease receipts, estimated unguaranteed residual value, and unearned income.
Contingent rent, also known as percentage rent, is a common practice in the franchise industry, especially for businesses that lease their premises. It is based on a percentage of the franchisee's gross sales, offering the franchisor additional income when the franchisee performs well. This arrangement can align the interests of both parties, as the franchisor benefits from the franchisee's success. However, it also means that the franchisor's rental income can fluctuate based on the franchisee's sales performance.
For a prospective Burger King franchisee, understanding the terms of contingent rent is crucial. It is important to know how 'Gross Sales' are defined in the lease agreement, as this will determine the base upon which the percentage is calculated. Franchisees should also be aware of the reporting requirements for Gross Sales, which typically involve submitting regular financial statements to the franchisor. In Burger King's case, the franchisee must deliver to the Lessor a statement prepared by a Certified Public Accountant setting forth Gross Sales for the preceding Lease Year within thirty (30) days following each Lease Year.
It's also important to note that the FDD provides figures for future rents to be received, not the actual contingent rents received during the year. A prospective franchisee may want to ask Burger King for historical data on actual contingent rents received to better understand the potential variability of this income stream.