What depreciation method does Exit use for furniture and fixtures, and how are the estimated useful lives of the assets determined?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
Property, plant, and equipment are stated at cost. Significant additions or improvements extending asset lives are capitalized; normal maintenance and repairs are charged to expense as incurred. Upon retirement or other disposition of fixed assets, applicable cost and accumulated depreciation or amortization are removed from the accounts. Any gains or losses are included in the determination of the results of operations. Depreciation of furniture and fixtures is determined using the straight-line method over the estimated useful lives of the assets.
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, the company uses the straight-line method to depreciate furniture and fixtures. The depreciation is applied over the estimated useful lives of these assets.
For a prospective Exit franchisee, this means that the cost of furniture and fixtures purchased for the business will be spread evenly over their useful life, rather than being expensed all at once. This can impact the franchisee's profitability in the short term, as the initial investment is not fully tax-deductible in the first year. However, it also means that the franchisee will have a consistent depreciation expense each year, which can help with financial planning.
The FDD excerpt does not specify how Exit determines the estimated useful lives of the assets. This determination is important because it directly impacts the annual depreciation expense. A longer estimated useful life will result in a lower annual expense, while a shorter life will result in a higher expense. Prospective franchisees should inquire about the specific estimated useful lives that Exit uses for different types of furniture and fixtures to understand the potential impact on their financial statements.