What rate does City Wide use for the initial and subsequent measurement of all lease liabilities?

According to City Wide's 2025 Franchise Disclosure Document, the company has elected to use a risk-free rate, specifically the rate of a zero-coupon U.S. Treasury instrument, for both the initial and subsequent measurement of all lease liabilities. This risk-free rate is determined using a period comparable with the lease term.

For a prospective City Wide franchisee, this means that the interest rate used to calculate the present value of lease payments will be based on U.S. Treasury instruments. This approach provides a standardized and transparent method for determining lease liabilities, as it relies on a widely recognized benchmark. By using a risk-free rate, City Wide aims to reflect the time value of money without factoring in additional risk premiums that might be associated with other borrowing rates.

It's important to note that the specific risk-free rate will vary depending on the lease term, as the rate is determined using a period comparable to the lease. This ensures that the discount rate accurately reflects the duration of the lease obligation. Franchisees should be aware of the prevailing U.S. Treasury rates at the time of entering into a lease agreement, as these rates will directly impact the calculation of their lease liabilities. This approach is more conservative than using the franchisee's actual borrowing rate, which would likely be higher.