What is the reported total value of Burger King's operating lease assets, net?
Burger_King Franchise · 2025 FDDAnswer from 2025 FDD Document
statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate o
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 company acquired Carrols Restaurant Group, Inc. on May 16, 2024. As part of this acquisition, Burger King obtained operating lease assets with a fair value of $705 million and operating lease liabilities, net of current portion, with a fair value of $684 million. Additionally, the company reacquired franchise rights valued at $363 million.
The fair values of these operating lease assets and liabilities were determined by discounting the lease payments using Burger King's incremental borrowing rate, which corresponds to the maturity of each lease. This rate is based on the company's secured borrowings and implied spreads over risk-free discount rates that align with the lease terms. The reacquired franchise rights were valued using the excess earnings method.
In summary, while the gross operating lease assets acquired by Burger King were valued at $705 million, the net value, considering the operating lease liabilities, provides a more comprehensive view of the financial impact of these leases on the company's balance sheet. This distinction is crucial for prospective franchisees to understand the financial obligations and assets associated with such acquisitions.