What is the total present value of net minimum lease payments for Goldfish Swim School?
Goldfish_Swim_School Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company recognizes expense for operating leases on a straight-line basis over the lease term. The Company made a policy election not to separate lease and nonlease components for all leases. Therefore, all payments are included in the calculation of the right-of-use asset and lease liability.
The Company elected to use the risk-free rate as the discount rate for calculating the right-of-use asset and lease liability in place of the incremental borrowing rate for all leases. As such, the Company considers the U.S. daily treasury par yield curve issued by the U.S. Department of the Treasury to be a risk-free rate.
Source: Item 22 — CONTRACTS (FDD pages 76–77)
What This Means (2025 FDD)
Based on the 2025 Franchise Disclosure Document, the excerpts provided do not contain the specific figures for the total present value of net minimum lease payments for Goldfish Swim School. However, the document does discuss the company's accounting policies regarding leases. It states that Goldfish Swim School recognizes expense for operating leases on a straight-line basis over the lease term and includes all payments in the calculation of the right-of-use asset and lease liability. The company uses the risk-free rate, based on the U.S. daily treasury par yield curve, as the discount rate for these calculations.
This accounting treatment means that Goldfish Swim School aims to evenly distribute the cost of the lease over its duration, which can provide a consistent expense profile for the company. By electing not to separate lease and nonlease components, the company simplifies its accounting process. Using a risk-free rate instead of an incremental borrowing rate can affect the present value calculation, potentially resulting in a lower discount rate and a higher present value of lease liabilities.
For a prospective franchisee, understanding these lease accounting practices is crucial because lease obligations often represent a significant financial commitment. While the FDD excerpts explain the methodology Goldfish Swim School uses, it does not disclose the actual present value of lease obligations. Therefore, it is important for a potential franchisee to request detailed information about typical lease terms, expected lease payments, and the present value of these obligations for a Goldfish Swim School location. This information will help in assessing the overall financial viability and profitability of the franchise.
To gain a comprehensive understanding of lease-related financial obligations, a prospective franchisee should directly ask Goldfish Swim School for detailed financial projections that include estimated lease payments and their present value. Additionally, it would be beneficial to consult with a financial advisor to evaluate the impact of these lease obligations on the franchisee's financial health and investment.