Over what period are area service agreements amortized for Jersey Mikes?
Jersey_Mikes Franchise · 2025 FDDAnswer from 2025 FDD Document
| 2024 | 2023 | |
|---|---|---|
| Area service agreements (a) | $ 139,417 | $ 139,417 |
| Trademarks (b) | 60,616 | 60,616 |
| Software developed for external use (c) | 37,638,956 | 34,253,212 |
| Website design (d) | 6,210,114 | 3,742,364 |
| Reacquired rights (e) | 2,959,077 | 1,250,632 |
| Intangible assets | 47,008,180 | 39,446,241 |
| Less accumulated amortization | 28,447,155 | 21,402,237 |
| Intangibles assets—net | $18,561,025 | $18,044,004 |
- (a) Area service agreements are amortized using the straight-line method over the determined useful life of 10 years.
- (b) Trademarks are amortized using the straight-line method over the determined useful life, ranging from 10–40 years.
- (c) Software developed for external use is amortized using the straight-line method over the determined useful life of 5 years.
- (d) Website design developed for a service is amortized using the straight-line method over the determined useful life of 5 years.
- (e) Reacquired rights are amortized using the straight-line method over the remaining life of th
Source: Item 22 — CONTRACTS (FDD page 77)
What This Means (2025 FDD)
According to Jersey Mike's 2025 Franchise Disclosure Document, area service agreements are amortized using the straight-line method over a useful life of 10 years. Amortization is an accounting technique used to spread the cost of an intangible asset over its useful life. In this case, Jersey Mike's amortizes area service agreements, which likely represent the value of services provided in a specific geographic area, over a decade.
For a prospective Jersey Mike's franchisee, this means that the cost associated with these area service agreements is recognized as an expense gradually over 10 years rather than all at once. The FDD also states that trademarks are amortized using the straight-line method over a useful life ranging from 10 to 40 years, software developed for external use is amortized over 5 years, website design developed for a service is amortized over 5 years, and reacquired rights are amortized over the remaining life of the franchise agreement, ranging from 3 to 6 years.
The amortization expense for these intangibles totaled $7,459,476 in 2024, $7,370,936 in 2023, and $6,664,147 in 2022. Understanding the amortization schedule for various assets can help a franchisee better interpret the financial statements of Jersey Mike's and assess the long-term value of these intangible assets.
It is important for potential franchisees to consult with a financial advisor to fully understand the implications of amortization and how it affects the financial performance of Jersey Mike's.