How does Bw Premier Collection account for variable lease costs?

According to Bw Premier Collection's 2025 Franchise Disclosure Document, the company addresses variable lease costs as follows: Leases often include rent increases over the lease term, which Bw Premier Collection recognizes as an expense on a straight-line basis throughout the lease. Some leases require Bw Premier Collection to cover expenses like taxes, insurance, maintenance, and other operating costs related to the leased asset.

However, these additional costs are not factored into the measurement of the right-of-use (ROU) assets and lease liabilities if they are variable. Instead, Bw Premier Collection recognizes these variable lease costs as a variable lease expense when they are incurred. This means that costs that fluctuate, such as property taxes that may change annually, are accounted for separately as they arise rather than being included in the initial lease liability calculation.

For a prospective franchisee, this accounting practice means that while the base rent is predictable and expensed evenly over the lease term, they should also budget for these variable costs, which can fluctuate and impact their operating expenses. Understanding the nature and potential variability of these costs is crucial for accurate financial planning and management. Franchisees should carefully review their lease agreements to identify which costs are considered variable and how they might change over time.

In the year ending November 30, 2023, Bw Premier Collection reported $50,000 in variable lease costs. This provides a benchmark for franchisees to understand the magnitude of these costs in relation to the operating lease costs, which totaled $958,000 for the same period. This information helps potential franchisees appreciate the relative significance of variable lease costs within the overall lease expense structure.