What was the gross carrying amount for 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 for franchise agreements in 2023 was $319,855. This figure represents the initial cost or value of the franchise agreements that Carls holds, before accounting for any amortization. Amortization is the systematic reduction of the carrying value of an intangible asset, such as a franchise agreement, over its useful life.
For a prospective Carls franchisee, the gross carrying amount of franchise agreements is not a direct cost they will pay. Instead, it reflects the franchisor's investment in establishing and maintaining the franchise system. The accumulated amortization for franchise agreements in 2023 was ($143,300), resulting in a net carrying amount of $176,555. The net carrying amount represents the value of these agreements after accounting for the portion of their value that has already been recognized as an expense.
It's important to note that these figures are part of Carls' overall financial statements and provide insight into how the company values its intangible assets. Franchisees should focus more on the initial franchise fee, royalties, and other fees they will be required to pay, as detailed in other sections of the FDD. Understanding the franchisor's accounting practices can offer a broader understanding of the franchise system's financial health, but the direct impact on a franchisee's finances is limited.