How is lease expense for lease payments recognized by Crepe De Licious?

According to Crepe De Licious's 2025 Franchise Disclosure Document, the company recognizes lease expense for lease payments on a straight-line basis over the lease term. This means that the total lease payments are divided evenly across the entire duration of the lease, resulting in a consistent expense amount each period.

Crepe De Licious determines if an arrangement is a lease at the beginning based on the written terms and conditions of the agreement. They recognize right-of-use (ROU) assets and lease liabilities at the start date, based on the present value of lease payments over the lease term. To determine the present value, Crepe De Licious uses the rate implicit in the lease when known. However, since most operating leases do not provide an implicit rate, the company uses a risk-free rate based on information available at the lease commencement date. This risk-free rate is determined from rates published by the U.S. Department of the Treasury for time periods matching the length of the lease.

Crepe De Licious may include options to extend or terminate the lease in their lease terms. These options are considered in the calculation of the ROU asset and lease liability only when it is reasonably certain that the company will exercise the option. Additionally, Crepe De Licious applies the short-term lease exemption to leases with terms of twelve months or less that do not include options to purchase the underlying asset. They also apply a practical expedient for lease arrangements with parties under common control, based on the written terms and conditions of the lease.

For leases containing both lease and non-lease components, Crepe De Licious combines these components and accounts for them as a single lease component. This approach may lead to variability in future lease payments, as the amounts of non-lease components (such as real estate taxes, utilities, property insurance, and excess mileage fees) are typically revised from period to period. These variable lease payments are recognized in operating expenses in the period when the obligation for those payments is incurred.