How was the acquisition of S.D.R. Inc. accounted for in relation to the Christian Brothers Automotive franchise?
Christian_Brothers_Automotive Franchise · 2025 FDDAnswer from 2025 FDD Document
Notes to Consolidated Financial Statements December 31, 2024 and 2023
1. Nature of Operations and Significant Accounting Policies
Christian Brothers Automotive Corporation (CBAC or the Company), a Texas subchapter S corporation, is a national franchisor of automobile repair establishments located throughout the United States of America. CBAC was formed in August 1982 and had 302 and 281 independent franchises in operation at December 31, 2024 and 2023, respectively. In addition to franchising operations, CBAC engages in the business of investing in, owning and selling the real estate and facilities from which its franchise locations operate. These real estate sales are typically made to third parties, some of which are under saleleaseback agreements.
On December 31, 2022, the Company's Board of Directors declared the 2022 Stock Split. Each shareholder of record on August 31, 2022 received a dividend of 834.342222 additional shares of common stock for each then-held share, distributed after the close of trading on December 31, 2022. All share and per share amounts presented herein have been retroactively adjusted to reflect the impact of the 2022 Stock Split.
In September 2023, CBAC acquired 100% ownership of WWK Warranty and Administration LLC, (WWK). WWK, a wholly owned subsidiary of the Company, works in conjunction with dealerships to provide vehicle service contracts and maintenance coverage for their customers.
In March 2024, CBAC formed Nice Difference Care+ (Care+) to provide extended warranty services for repairs, maintenance and vehicle care at Christian Brothers Automotive franchise locations. Care+ is wholly owned by CBAC and have been consolidated within the financial statements of CBAC.
In August 2024, the Company entered a transaction to acquire a 44% ownership stake in Foedus Sui, LLC (Foedus), which is classified as a variable-interest entity. The Company holds a controlling interest in Foedus via its financial and contractual arrangements. As the primary beneficiary of Foedus, the Company consolidates Foedus in its consolidated financial statements.
Source: Item 23 — RECEIPTS (FDD pages 76–372)
What This Means (2025 FDD)
Based on the 2025 Christian Brothers Automotive Franchise Disclosure Document, there is no mention of the acquisition of S.D.R. Inc. within the provided excerpts. The document does detail other acquisitions and formations, such as the acquisition of WWK Warranty and Administration LLC (WWK) in September 2023, and the formation of Nice Difference Care+ (Care+) in March 2024. These entities are wholly owned by Christian Brothers Automotive and are consolidated within the company's financial statements. Additionally, in August 2024, Christian Brothers Automotive acquired a 44% ownership stake in Foedus Sui, LLC (Foedus), which is also consolidated in the company's financial statements due to Christian Brothers Automotive holding a controlling interest.
Given the absence of information regarding S.D.R. Inc., it is not possible to determine how this acquisition was accounted for, or even if such an acquisition occurred. The FDD excerpts focus on the accounting treatment of WWK, Care+, and Foedus, explaining that these entities are consolidated into Christian Brothers Automotive's financial statements according to Generally Accepted Accounting Principles (GAAP). This consolidation includes eliminating all significant intercompany transactions and balances.
For a prospective franchisee, the lack of information on S.D.R. Inc. means they should directly inquire with Christian Brothers Automotive about any past or planned acquisitions that could affect the franchise system. Understanding the financial structure and consolidation practices of Christian Brothers Automotive is crucial for assessing the overall stability and potential risks associated with investing in the franchise.