For Dog Haus, are expenditures for repairs and maintenance charged to expense as incurred, or are they capitalized?

According to Dog Haus's 2025 Franchise Disclosure Document, expenditures for repairs and maintenance are charged to expense as incurred. This means that Dog Haus franchisees will account for these costs as they happen, rather than capitalizing them as assets. Capitalizing would involve spreading the cost over the asset's useful life. Instead, the full cost is recognized in the accounting period when the repair or maintenance occurs.

However, the FDD specifies that expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. This distinction is important for franchisees to understand, as it affects how these costs are recorded and depreciated over time. Major upgrades or renewals that significantly extend the life of an asset are treated differently from routine repairs.

For a prospective Dog Haus franchisee, this means that regular upkeep costs like fixing equipment or painting will be immediately expensed, impacting the profit and loss statement in the current period. Larger investments that improve or extend the life of assets, such as a complete kitchen renovation, will be capitalized and depreciated over their useful life. This accounting practice is fairly standard in the franchise industry, as it provides a clear and consistent method for handling different types of expenditures.