According to the financial statements, what is the lease liability for City Wide?
City_Wide Franchise · 2025 FDDAnswer from 2025 FDD Document
| 2024 | 2023 | 2022 | |
|---|---|---|---|
| Operating lease cost | $ 114,922 | $ 114,922 | $ 114,922 |
| Operating cash flows from operating leases | 203,570 | 203,570 | 203,570 |
| Weighted-average remaining lease term operating leases | 5.75 years | 6.75 years | 7.75 years |
| Weighted-average discount rate on operating leases | 1.63% | 1.63% | 1.63% |
Future minimum lease payments and reconciliation to the consolidated balan
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 65)
What This Means (2025 FDD)
According to City Wide's 2025 Franchise Disclosure Document, the company's total lease liabilities are detailed in Note 5 of the financial statements. As of December 31, 2024, the total lease liabilities amount to $1,164,873 after deducting interest of $56,545 from the total future undiscounted lease payments of $1,221,418. This figure represents the present value of the company's obligations for its office space lease, which extends to 2030 and includes a renewal option for an additional five years. The lease payments have an escalating fee schedule. The company uses a risk-free rate based on a zero-coupon U.S. Treasury instrument to measure these lease liabilities.
For a prospective City Wide franchisee, understanding the lease liabilities of the franchisor is important as it provides insight into the financial obligations and stability of the company. The fact that City Wide leases office space from a related party is also relevant, as it suggests a close relationship between the company and its affiliates. This arrangement could potentially impact the terms and conditions of the lease, and it is something a franchisee may want to explore further during their due diligence.
The FDD also outlines the future lease payments for the years 2025 through 2029, each amounting to $206,115 for 2025 and $213,748 annually for the following four years. After 2029, the remaining lease payments total $160,311. These figures provide a clear picture of City Wide's future financial commitments related to its lease obligations.
Overall, the detailed disclosure of City Wide's lease arrangements and liabilities in the FDD offers transparency and allows potential franchisees to assess the financial health and stability of the company. Understanding these obligations is a crucial part of evaluating the franchise opportunity and making an informed investment decision.