What portion of the shared operating lease does Face Foundrie reflect in its financial statements?
Face_Foundrie Franchise · 2025 FDDAnswer from 2025 FDD Document
hey are filed. As of December 31, 2024, the 2023, 2022 and 2021 tax years were subject to examination.
(o) Leases
The Company has adopted ASC 842, Leases, which requires lessees to recognize the assets and liabilities that arise from operating and finance leases on the balance sheets, with a few exceptions. The Company has a shared operating lease agreement with multiple related parties to warehouse and office space from the related parties common owner. The Company has reflected one third of the full lease arrangement in its financial statements to reflect the Company's share of the obligation. Were other related parties unable to meet their obligations, it is likely the Company would bear responsibility for the larger lease obligation.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 73)
What This Means (2025 FDD)
According to Face Foundrie's 2025 Franchise Disclosure Document, the company shares office space with two related parties and reflects one-third of the total lease arrangement in its financial statements. The document specifies that this portion represents Face Foundrie's share of the obligation. The total monthly lease payment that the three entities split in 2022 was $13,888, and it escalates 2% each year thereafter. Each entity pays their own share, and there are no reimbursements as of December 31, 2024, 2023, and 2022.
This accounting practice means that Face Foundrie's financial statements only show its direct lease obligations, providing a clearer picture of its individual financial commitments. However, the FDD notes a potential risk: if the other related parties sharing the lease were unable to meet their obligations, Face Foundrie would likely bear responsibility for the larger lease obligation. This is an important consideration for potential franchisees, as it highlights a contingent liability that is not fully reflected in the standard financial statements.
Prospective franchisees should be aware of this shared lease arrangement and the potential financial implications. While Face Foundrie's financial statements present its direct share of the lease, the risk of assuming a larger portion of the lease payment should other parties default is a factor to consider. It would be prudent for potential franchisees to inquire about the financial stability of the related parties sharing the lease and to understand the full extent of their potential liability in a default scenario. Understanding these details is crucial for assessing the true financial risks and obligations associated with the Face Foundrie franchise.