What was the total amount of franchisor development costs incurred by Burros Fries during 2020?
Burros_Fries Franchise · 2024 FDDAnswer from 2024 FDD Document
g the year ended December 31, 2022.
NOTE 2 – INTANGIBLE ASSETS
The Company incurred franchisor development costs during 2020. This consists of services required by the Company to create a comprehensive franchise program and includes legal fees, development of franchise documents, marketing and filing services. Completed costs are $21,875. Accumulated amortization at December 31, 2022 is $3,888.
The amortization for development costs is 15 years. Amortization expense for the year ended December 31, 2022 was $1,458. Estimated future five-year amortization expense for
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 53)
What This Means (2024 FDD)
According to Burros Fries' 2024 Franchise Disclosure Document, the company incurred franchisor development costs during 2020 totaling $21,875. These costs covered services required to create a comprehensive franchise program. These services included legal fees, development of franchise documents, as well as marketing and filing services.
For a prospective franchisee, this indicates the level of initial investment Burros Fries made in establishing its franchise system. It is important to note that these costs are amortized over a 15-year period. As of December 31, 2022, the accumulated amortization was $3,888, with an amortization expense for the year ended December 31, 2022, being $1,458. The estimated future five-year amortization expense for development costs is $1,458 per year, totaling $7,290.
Understanding the franchisor's development costs and how they are accounted for can provide insight into the financial management and long-term planning of Burros Fries. Franchisees may want to inquire about how these costs are factored into the franchise fee and ongoing royalty payments.