What was the total value of land leased to others by Carls as of January 31, 2023?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
ts measured at fair value on a non-recurring basis during fiscal 2023:
| Fair Value Measurements | Impairment Charges | |
|---|---|---|
| Assets to be disposed of (Level 2)(1) | $ — | $ 2,483 |
| Assets to be held and used (Level 3)(2) | $ — | $ 444 |
(1) Represents the impairment of long-lived assets including property & equipment, net and operating lease assets for multiple domestic company-operated closed restaurants.
NOTE 14 — COMMITMENTS AND CONTINGENT LIABILITIES
Lease Commitments
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Many of the restaurants we have sold to franchisees are on leased sites, and we have entered into sublease agreements with these franchisees but remained principally liable for the lease obligations. We account for the sublease payments received as rent revenue in franchised restaurants and other revenue, and the payments on the leases as rent expense in franchised restaurants and other expense, in our accompanying Combined Consolidated Statements of Income. As of January 31, 2024, the nominal value of the lease obligations under the remaining master leases' primary terms is $422,539.
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 79–80)
What This Means (2024 FDD)
The 2024 FDD for Carls does not explicitly state the total value of land leased to others as of January 31, 2023. However, it does provide information on lease commitments and sale-leaseback transactions. Specifically, as of January 31, 2023, the nominal value of lease obligations under the remaining master leases' primary terms is $455,785. This figure represents the lease obligations for restaurants that Carls has sold to franchisees but for which Carls remains principally liable under the master leases.
Additionally, Carls has entered into sale-leaseback transactions with independent third parties for 126 restaurant properties. Under this arrangement, Carls sold the properties but leases them back, retaining them as owned assets for accounting purposes. As of January 31, 2023, the net book value of these associated assets, included in property and equipment, net of accumulated depreciation and amortization, was $117,126.
To fully understand the extent of Carls's land leasing activities, a prospective franchisee should ask the franchisor for a detailed breakdown of all land leases, including those where Carls is the lessor and lessee. This information would provide a clearer picture of the financial obligations and potential revenue streams associated with land leases.