What was the gross carrying amount of Carls' franchise agreements in 2023?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
l 2024, CKE Restaurants sold one Hardee's restaurant and certain related inventory and fixed assets with a net book value of $1,265. In connection with the sale of this restaurant, we received aggregate consideration of $2,082, and recognized a net gain of $817, which is included in facility action charges, net, in our accompanying Combined Consolidated Statements of Income. In connection with the refranchising transaction, the franchisee acquired real property and equipment related to the restaurant location.
NOTE 6 — INTANGIBLE ASSETS, NET
The table below presents our intangible assets as of January 31, 2024 and 2023:
| 2024 | 2023 | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Weighted Av |
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 79–80)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, the gross carrying amount of franchise agreements in 2023 was $319,855. This figure represents the initial cost or value of the franchise agreements before any accumulated amortization is deducted. Amortization is the systematic reduction of the carrying value of an intangible asset, like a franchise agreement, over its useful life.
For a prospective Carls franchisee, the gross carrying amount is relevant because it reflects the initial investment Carls has made in establishing and supporting its franchise system. The franchise agreements have a weighted average life of 20 years, which means Carls amortizes the value of these agreements over that period. This amortization is an accounting practice and doesn't directly impact the franchisee's day-to-day operations or financial obligations.
It's important to note that the net carrying amount, which is the gross carrying amount less accumulated amortization, provides a more accurate picture of the remaining value of the franchise agreements on Carls's balance sheet. In 2023, the net carrying amount for franchise agreements was $176,555, after deducting accumulated amortization of $143,300. This indicates the value that Carls assigns to its franchise agreements after accounting for their use over time.