When are variable payments included in the future lease payments for Craters & Freighters?

According to Craters & Freighters' 2025 Franchise Disclosure Document, variable payments are included in future lease payments when those payments depend on an index or a rate. This means that if a portion of the lease payment fluctuates based on an external benchmark like the Consumer Price Index (CPI) or a market interest rate, those variable amounts are factored into the calculation of the lease liability.

For a prospective Craters & Freighters franchisee, this is important for understanding how lease obligations are accounted for. If the lease has variable payment terms tied to an index or rate, the franchisee should expect these to be included when determining the present value of future lease payments. Subsequent changes in the index or rate will be recorded as variable lease expense or income in the period they are incurred, affecting the franchisee's financial statements.

This accounting treatment ensures that the lease liability reflects the economic substance of the lease agreement, including potential fluctuations in payments. Franchisees should carefully review their lease agreements to identify any variable payment terms and understand how these will impact their financial reporting. This also means that increases or decreases to variable lease payments due to subsequent changes in an index or rate are recorded as variable lease expense (income) in the future period in which they are incurred.