What is the present value of C12 Group's lease liability as of December 31, 2023?
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.
Income Taxes: The Company, as an LLC, is not a taxpaying entity for federal income tax purposes. Accordingly, income and loss are passed directly to its members and taxed at their individual level. Management is not aware of any tax positions that would have a significant impact on its financial position. Its federal tax returns for the last four years remain subject to examination. The Company is subject to the Texas margin tax.
Source: Item 22 — CONTRACTS (FDD page 46)
What This Means (2025 FDD)
According to C12 Group's 2025 Franchise Disclosure Document, the present value of the company's lease liabilities as of December 31, 2023, is not explicitly stated. However, the document does provide information on how C12 Group handles its operating leases.
The FDD states that operating leases with terms 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 lease term. C12 Group uses a risk-free discount rate to calculate this present value. The company considers fixed and variable payment terms, prepayments, incentives, and options to extend, terminate, or purchase when determining lease asset values. Renewal, termination, or purchase options affect the lease term only if the option is reasonably certain to be exercised.
While the specific present value of lease liabilities as of December 31, 2023, is not disclosed, the FDD mentions that the company had operating leases for certain office space and equipment. Rent expense under these leases totaled approximately $134,000 in 2023 and $124,000 in 2022. The weighted-average remaining lease term was 1.16 years, and the weighted-average discount rate was 1.08% at year-end. Future commitments relating to these lease agreements are also provided as of December 31, 2023.
A prospective franchisee should request the specific present value of lease liabilities as of December 31, 2023, from C12 Group to gain a clearer understanding of the company's financial obligations related to its leases. This information, along with the details provided on lease terms and discount rates, will help in assessing the financial health and stability of C12 Group.