How does the equity compensation for Class B and C shares for Camp Margaritaville compare between 2022 and 2023?
Camp_Margaritaville Franchise · 2025 FDDAnswer from 2025 FDD Document
The Class B shares are fully vested. The Class C shares have a service-based component for vesting, vesting monthly on a straight-line basis over five years. The Class B and C shares entitle recipients to receive a share of future profits and appreciation in the Company that accrue above a Hurdle Amount upon a Company Transaction. A Company Transaction is defined in the MEIPs as the sale of the Company, a liquidity event, a qualified IPO, or the dissolution of the Company. In 2023, the Hurdle Amounts for all holders of Class B and C shares were lowered, resulting in a revaluation of the shares and incremental compensation costs. Concurrent with the 2023 change in Hurdle Amounts, the Company paid distributions to Class B and C holders in the amount of $1,080,880 and $1,225,157 respectively. The compensation costs arising from this modification are reflected in the tables below. Compensation costs associated with the Class B and C shares are included in selling, general, and administrative expenses on the accompanying consolidated statements of operations.
In 2023, the Hurdle Amounts for all holders of Class B and C shares who did not partake in the distribution were lowered. The change in hurdle rates was the catalyst for modification accounting, resulting in a revaluation of the shares and incremental compensation costs incurred. Incremental compensation cost resulting from the modification was as follows:
Compensation costs associated with the Class B and C shares are included in selling, general, and administrative expenses on the accompanying consolidated statements of operations.
| Balance at December 31, 2021 | $ (106,130,260) |
|---|---|
| ASC 842 opening equity adjustment | 68,036 |
| Contributions | 155,455,945 |
| Redemptions/distributions paid | (158,034,914) |
| Equity issuance transaction costs | (8,503,316) |
| Class C interest | 1,706,166 |
| Net income for the year ended December 31, 2022 | 7,243,832 |
| Balance at December 31, 2022 | (108,194,511) |
| Contributions | |
| Redemptions/distributions paid | (32,078,955) |
| Equity issuance transaction costs | – |
| Class B and C interest | 11,474,320 |
| Net income for the year ended December 31, 2023 | 27,784,671 |
| Balance at December 31, 2023 | $ (101,014,475) |
Source: Item 23 — RECEIPTS (FDD pages 72–406)
What This Means (2025 FDD)
According to Camp Margaritaville's 2025 Franchise Disclosure Document, there were changes to the equity compensation related to Class B and C shares between 2022 and 2023. In 2023, Camp Margaritaville lowered the Hurdle Amounts for all holders of Class B and C shares, which resulted in a revaluation of the shares and incremental compensation costs. Concurrent with this change, Camp Margaritaville paid distributions to Class B and C holders in the amounts of $1,080,880 and $1,225,157, respectively. The compensation costs arising from this modification are reflected in the financial statements. These compensation costs are included in selling, general, and administrative expenses on the consolidated statements of operations.
In 2023, Camp Margaritaville also lowered the Hurdle Amounts for Class B and C shareholders who did not participate in the distribution. This change in hurdle rates triggered modification accounting, leading to a revaluation of the shares and additional compensation costs. The compensation costs associated with Class B and C shares are included in selling, general, and administrative expenses on the consolidated statements of operations.
In 2022, the FDD does not mention any specific changes to hurdle amounts or revaluation of shares. However, the balance sheet information shows a Class C interest of $1,706,166 for the year ended December 31, 2022. In 2023, the combined Class B and C interest amounted to $11,474,320. This indicates a significant increase in the equity compensation expenses related to these share classes from 2022 to 2023, primarily due to the lowered Hurdle Amounts and subsequent revaluation of shares in 2023.