Are Crepe De Licious' lease liabilities remeasured as a result of changes in sales volume?
Crepe_De_Licious Franchise · 2025 FDDAnswer from 2025 FDD Document
ol. The amount due from the related party is $12,000 and $-0- at December 31, 2024 and December 31, 2023, respectively.
The Company has an amount due from its sole shareholder. This amount does not have a stated interest rate, is unsecured and has no set repayment terms. The amount receivable from the shareholder at December 31, 2024 and December 31, 2023 was $37,405 and $59,831, respectively.
5. Leases
The Company leases retail space and two vehicles under operating lease arrangements through 2028, 2026 an
Source: Item 23 — RECEIPTS (FDD pages 57–233)
What This Means (2025 FDD)
According to Crepe De Licious's 2025 Franchise Disclosure Document, lease liabilities are not remeasured due to changes in sales volume. The document specifies that the company's retail space lease agreement includes variable lease payments calculated as eight percent of retail sales over a minimum gross sales of $824,000. This variable payment is made monthly once the minimum sales are reached.
Instead of remeasuring lease liabilities, Crepe De Licious treats changes in sales volume as variable lease payments. These variable payments are excluded from the measurement of both the Right-of-Use (ROU) asset and the lease liability. This accounting practice means that fluctuations in sales above the specified minimum do not directly impact the company's reported lease liabilities.
For a prospective Crepe De Licious franchisee, this is a notable factor in financial planning. While increased sales will lead to higher variable lease payments, these payments won't retroactively alter the overall lease liability. This can provide a degree of predictability in long-term financial obligations, as the core lease liability remains stable regardless of sales performance. Franchisees should carefully consider the implications of the variable lease payments when projecting profitability and cash flow, especially in relation to sales targets and potential revenue growth.