Who has the discretion to exercise lease renewal options for C12 Group's office space?
C12_Group Franchise · 2025 FDDAnswer from 2025 FDD Document
Leases: Operating leases with terms of greater than 12 months are recognized as lease assets and obligations at the lease commencement date based on the present value of lease payments over the term of the lease. The Company has elected to not separate lease and non-lease components. The Company utilizes the risk-free discount rate, according to the Company's elected policy for this class of assets. Operating lease expense is recognized in operating expenses on a straight-line basis over the lease term. In determining lease asset values, the Company considers fixed and variable payment terms, prepayments, incentives, and options to extend, terminate or purchase. Renewal, termination, or purchase options affect the lease term used for determining lease asset value only if the option is reasonably certain to be exercised.
Source: Item 22 — CONTRACTS (FDD page 46)
What This Means (2025 FDD)
According to the 2025 C12 Group Franchise Disclosure Document, when determining the value of lease assets, C12 Group considers "options to extend, terminate or purchase." However, renewal options only affect the lease term if the option is reasonably certain to be exercised.
This means that C12 Group itself, as the company managing its own leases, assesses whether it is reasonably certain to exercise renewal options. This determination impacts how the lease is valued on their financial statements.
For a prospective franchisee, this information is relevant in understanding how C12 Group manages its own financial obligations and assets. It does not directly address the franchisee's lease obligations, as the franchisee operates their business from their own location.