What is the weighted average life in years for Carls' favorable lease agreements?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
ection with the sale of this restaurant, we received aggregate consideration of $2,082, and recognized a net gain of $153, which is included in facility action charges, net, in our
accompanying Consolidated Statements of Operations. In connection with the refranchising transaction, the franchisee acquired real property and equipment related to the restaurant location.
NOTE 6 — GOODWILL AND INTANGIBLE ASSETS, NET
During the fourth quarter of fiscal 2024 and 2023, we performed our annual impairment tests for goodwill and indefinite-lived intangible assets using a qualitative approach and determined that it is more likely than not that the fair value is greater than the carrying value. Accordingly, no impairment losses were recorded in fiscal 2024 or 2023.
The table below presents our i
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 79–80)
What This Means (2024 FDD)
According to Carls' 2024 Franchise Disclosure Document, the weighted average life for favorable lease agreements is 17 years. This means that Carls amortizes the value of these lease agreements over a 17-year period for accounting purposes. The initial gross carrying amount of these favorable lease agreements is $5,875, with accumulated amortization of $4,245, resulting in a net carrying amount of $1,630.
For a prospective franchisee, understanding the terms and duration of lease agreements is crucial. Favorable lease agreements can be a significant asset, providing a financial advantage over the lease term. The 17-year weighted average life suggests that these agreements offer long-term benefits to Carls.
In 2023, the gross carrying amount was $9,688, with accumulated amortization of $7,613, resulting in a net carrying amount of $2,075. These figures indicate how the value of the favorable lease agreements changes over time due to amortization. Franchisees should inquire about the specific terms of these favorable lease agreements and how they might impact their restaurant's profitability and long-term financial health.