What was the amortization of finance lease assets for Carls in fiscal year 2024?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
January 31, 2024, future minimum lease and sublease rent revenue expected to be received, are as follows:
Finance Leases Operating Leases Subleases Subleases Owned Properties Fiscal: 2025 $ 246 $ 77,732 $ 7,595 2026 245 69,733 8,191 2027 213 60,351 8,202 2028 190 52,474 7,853 2029 97 41,874 7,129 Thereafter 202 119,002 45,439 Total future minimum lease and sublease rent revenue 1,193 $ 421,166 $ 84,409 Unearned interest income (229) Present value of leases receivable 964 Less current portion (180) Leases recei
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 79–80)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, the amortization of finance lease assets for fiscal year 2024 was $1,596. This figure represents the expense recognized during the year for the depreciation of assets that Carls holds under finance leases, which are essentially leases that transfer ownership of the asset to the lessee by the end of the lease term.
For a prospective Carls franchisee, understanding the amortization of finance lease assets is crucial because it directly impacts the franchisee's financial statements and profitability. Finance leases are a common way for businesses to acquire assets without paying the full purchase price upfront. The amortization expense reflects the cost of using these assets over their useful lives.
The FDD also provides comparative data for the previous fiscal year, 2023, during which the amortization of finance lease assets was $2,432. This decrease in amortization expense from 2023 to 2024 could be due to several factors, such as fewer assets being held under finance leases, changes in the estimated useful lives of the assets, or modifications to the lease agreements. Franchisees should analyze these trends to understand Carls's asset management and leasing strategies.
It's important to note that the finance lease cost also includes interest on finance lease liabilities and variable lease costs. For fiscal year 2024, the interest on finance lease liabilities was $1,572, and the variable lease cost was $2. The total finance lease cost for the year was $3,170. Understanding the components of finance lease costs can help franchisees better manage their lease obligations and overall financial performance.
In addition to finance leases, Carls also incurs operating lease costs. In fiscal year 2024, the operating lease cost was $85,267, with a variable lease cost of $1,229, resulting in a total operating lease cost of $86,496. The total lease cost, including both finance and operating leases, was $89,666 for fiscal year 2024. Franchisees should carefully review all lease agreements and understand the associated costs to ensure they are factored into their financial planning and budgeting.