What costs are included in the cost of ROU assets for Clear Pest Pros?

According to Clear Pest Pros's 2025 Franchise Disclosure Document, the cost of Right-of-Use (ROU) assets includes several components. ROU assets are recognized at the date the underlying asset becomes available for use. The cost is the sum of lease liabilities recognized, initial direct costs incurred, and any lease payments made either at or before the lease's start date, minus any lease incentives received. These assets are then depreciated using the straight-line method over the shorter of the lease term or the estimated useful life of the assets.

For a prospective Clear Pest Pros franchisee, this means that the initial accounting for leased assets will involve more than just the stated lease payments. It includes any upfront costs directly related to setting up the lease, such as legal fees or brokerage commissions, and any payments made in advance. The franchisee will also need to account for any incentives offered by the lessor, which would reduce the overall cost of the asset.

This accounting treatment can impact the franchisee's financial statements, particularly the balance sheet, by recognizing both an asset (the right to use the property) and a corresponding liability (the obligation to make lease payments). The depreciation of the ROU asset and the interest expense on the lease liability will also affect the income statement over the lease term. Understanding these components is crucial for franchisees to accurately assess their financial obligations and manage their lease agreements effectively.