As of January 31, 2023, what was the total value of land that Carls leased to others?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
held and used (Level 3fl | | 444 | |
- (1) Represents the impairment of long-lived assets including property & equipment, net and operating lease assets for multiple domestic company-operated closed restaurants as well as multiple restaurants operated by the Shanghai business.
- (2) Represents impairment recorded for two underperforming domestic company-operated restaurants.
The following table presents long-lived assets measured at fair value on a non-recurring basis during fiscal 2022:
| | Fair Value Measurements | Impairment Charges | |-----------------------------------------
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 79–80)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, as of January 31, 2023, the nominal value of the lease obligations under the remaining master leases' primary terms is $455,785. This figure represents the total lease obligations for properties that Carls has subleased to franchisees, where Carls remains principally liable for the lease.
This commitment means that Carls is still responsible for these lease payments even though franchisees are operating on those sites. If franchisees fail to meet their sublease obligations, Carls would need to cover those costs. This arrangement creates a financial risk for Carls, as they are dependent on the franchisees' ability to pay.
For a prospective franchisee, this information highlights the importance of Carls's financial stability and its relationship with its franchisees. The substantial lease obligations indicate that Carls has significant ongoing financial responsibilities. A potential franchisee should consider this when assessing the overall financial health and stability of the Carls franchise system.