What is the total amount of future minimum lease payments for Hardees' financing method sale-leaseback obligations as of January 31, 2024?
Hardees Franchise · 2025 FDDAnswer from 2025 FDD Document
rrent portion | (634) | ) | (881) | | (13,375) | | (66,248) | | Lease obligations, less current portion | $ 15,719 | $ | 7,651 | $ | 91,971 | $ | 274,262 | Net rent under non-cancelable operating leases was as follows:
| Fiscal 2024 | F | iscal 2023 | ||
|---|---|---|---|---|
| Rent revenue: | ||||
| Minimum rent revenue | $ 90,4 | 50 | $ | 94,426 |
| Variable lease payments | 6,7 | 00 | 6,875 | |
| Total rent revenue | 97,1 | 50 | 101,301 | |
| Rent expense: | ||||
| Operating lease cost | (92,3 | 40) | (93,249) | |
| Variable lease cost | (1,8 | 54) | (1,391) | |
| Total operating lease cost | (94,1 | 94) | (94,640) | |
| Net rent income | $ 2,9 | 56 | $ | 6,661 |
Lease Term and Discount Rate as of January 31,
Weighted-average remaining lease term:
| 2024 | 2023 | |
|---|---|---|
| Finance leases | 12.11 years | 10.19 years |
| Operating leases | 7.67 years | 7.89 years |
| Weighted-average discount rate: | ||
| 2024 | 2023 | |
| Finance leases | 6.5 % | 8.1 % |
| Operating leases | 2.4 % | 1.8 % |
NOTE 10 — SALE-LEASEBACK TRANSACTIONS
We currently have entered into agreements with independent third parties under which we sold and leased back a total of 126 restaurant properties. The initial minimum lease terms are 20 years and include renewal options. The leases also include provisions that provide us with the ability to repurchase the properties, which for accounting purposes, prevents sale recognition as the leased properties are real estate, and we have concluded that no two real estate assets are substantially the same.
Under the financing method, the sales proceeds received are recorded in other current liabilities and other long-term liabilities until our continuing involvement with the properties is terminated, and the associated properti
Source: Item 21 — Financial Statements (FDD pages 84–85)
What This Means (2025 FDD)
According to Hardees' 2025 Franchise Disclosure Document, as of January 31, 2024, the future minimum lease commitments for Hardees' financing method sale-leaseback obligations are detailed in Note 10, Sale-Leaseback Transactions. These obligations stem from agreements where Hardees sold and leased back restaurant properties. As of January 31, 2024, the net book value of the associated assets was $115,805, compared to $117,126 as of January 31, 2023.
The FDD specifies that the initial minimum lease terms for these transactions are 20 years and include renewal options. These leases also allow Hardees the option to repurchase the properties. The accounting method used recognizes sales proceeds as liabilities until Hardees' involvement with the properties is terminated. Rent payments are recorded as principal and interest.
However, the specific breakdown of future minimum lease payments for the financing method sale-leaseback obligations as of January 31, 2024, is not provided in the table format. The FDD includes the financing method sale-leaseback liability, long-term portion which is $208,337 as of January 31, 2024. The FDD also includes future minimum lease commitments as of January 31, 2025.
A prospective Hardees franchisee should request a detailed schedule of these future minimum lease payments from Hardees to fully understand the financial obligations associated with these sale-leaseback transactions. This information is crucial for assessing the long-term financial health and stability of the franchise.