What is the estimated useful life range for leasehold improvements at a Carls franchise?

According to Carls's 2024 Franchise Disclosure Document, the estimated useful life for leasehold improvements is between 3 to 25 years. This means that Carls depreciates these improvements over this period for accounting purposes.

For a prospective franchisee, this is relevant because leasehold improvements are assets that are added to the leased property to make it suitable for the Carls business. These improvements can include things like interior walls, flooring, lighting, and other fixtures. The cost of these improvements can be significant, and the depreciation expense will impact the franchisee's profitability during the lease term.

The FDD also mentions that property and equipment are recorded at cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line method based on the assets' estimated useful lives, which generally range from three to 40 years. Leasehold improvements are amortized on a straight-line basis over the shorter of the estimated useful lives of the assets or the related lease terms. The amortization period for leasehold improvements includes renewal option periods only in instances in which the exercise of the renewal option is reasonably certain at the acquisition date because failure to exercise such option would result in an economic penalty. This means that if the lease term is shorter than the useful life of the improvements, the franchisee will depreciate the assets over the lease term. If there are renewal options that are reasonably certain to be exercised, those periods can be included in the amortization period.