What are the initial minimum lease terms for Carls' restaurant property financing method sale-leaseback transactions?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
For all of our 126 restaurant property financing method sale-leaseback transactions, whether assumed by or completed by the CKE Securitization Entities, the initial minimum lease terms are 20 years and include renewal options. The leases also include provisions that provide us with the ability to repurchase the properties, which for accounting purposes, prevents sale recognition as the leased properties are real estate, and we have concluded that no two real estate assets are substantially the same.
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 79–80)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, the initial minimum lease terms for all of their 126 restaurant property financing method sale-leaseback transactions are 20 years. These leases, whether assumed or completed by CKE Securitization Entities, also include renewal options.
This means that if Carls utilizes a sale-leaseback transaction to finance a restaurant property, the lease agreement will have a minimum term of 20 years, giving Carls the option to renew the lease after that initial period. This provides long-term stability for the location.
The leases also have provisions that allow Carls to repurchase the properties. This repurchase option, for accounting purposes, prevents the recognition of the sale because the leased properties are real estate, and Carls has determined that no two real estate assets are substantially the same.