How does Hydrodog account for contracts containing both lease and non-lease components?

According to Hydrodog's 2025 Franchise Disclosure Document, when contracts contain both lease and non-lease components, Hydrodog accounts for both components as a single lease component. This accounting practice is in accordance with ASC 842 Leases. This means that for financial reporting purposes, Hydrodog does not separate the lease and non-lease elements but treats them as one combined lease.

For a prospective Hydrodog franchisee, this means that if a contract includes elements beyond just the lease of a vehicle or equipment, such as maintenance or other services, Hydrodog will still account for the entire contract as a single lease. This simplifies the accounting process for Hydrodog, as it does not need to allocate costs and revenues between the lease and non-lease components.

This approach is an election made by Hydrodog, as accounting standards generally require lessees to separate lease components from non-lease components. By treating them as a single unit, Hydrodog avoids the complexity of allocating the contract's consideration between the different components. Franchisees should be aware of this accounting treatment as it may affect how Hydrodog reports its financial performance and how lease-related expenses are presented.