Does Closet Storage Concepts include options to extend the lease term in its leases?
Closet_Storage_Concepts Franchise · 2025 FDDAnswer from 2025 FDD Document
Leases are classified as either finance leases or operating leases based on criteria in ASC 842. The Company has operating leases for its corporate offices, warehouse space and retail showroom. The Company has finance leases for equipment and vehicles. Such leases generally have original lease terms between two and six years, and often include options to renew. The Company includes options to extend the lease term if the options are reasonably exercised. The Company currently considers its renewal options to be reasonably certain to be exercised. The Company does not have residual value guarantees or material restrictive covenants associated with its leases.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 59)
What This Means (2025 FDD)
According to Closet Storage Concepts' 2025 Franchise Disclosure Document, the company's leases often include options to renew. Closet Storage Concepts includes options to extend the lease term if the options are reasonably exercised. The company currently considers its renewal options to be reasonably certain to be exercised.
This indicates that Closet Storage Concepts, when securing leases for its corporate offices, warehouse space, and retail showrooms, typically negotiates terms that allow for potential extensions of the lease agreement. For a prospective franchisee, this suggests that the franchisor recognizes the value of maintaining a location and incorporates flexibility into its leasing strategy.
The inclusion of renewal options can be beneficial for Closet Storage Concepts franchisees as it provides an opportunity to continue operating in a successful location without the disruption and costs associated with relocation. However, the FDD also states that the company must deem these options as reasonably exercised. A franchisee should confirm what criteria Closet Storage Concepts uses to determine if a renewal option is reasonably exercised.