How are operating leases reflected on Kitchen Solvers' balance sheets?
Kitchen_Solvers Franchise · 2025 FDDAnswer from 2025 FDD Document
Operating leases are included in operating lease right-of-use ("ROU") assets, other current liabilities, and operating lease liabilities in our balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities in our balance sheets.
ROU assets represent the Company's right to use an underlying asset for the lease term, and lease liabilities represent the Company's obligation to make lease payments. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The Company uses the implicit rate when it is readily determinable. Operating lease ROU assets also includes any lease payments made and excludes any lease incentives. Lease expense for lease payments is recognized on a straightline basis over the lease term. The Company's lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise the option.
The Company has elected the short-term lease recognition exemption for all applicable classes of underlying assets. Leases with an initial term of 12 months or less, that do not include an option to purchase the underlying asset that we are reasonably certain to exercise, are not recorded on the balance sheet.
Source: Item 21 — Financial Statements (FDD pages 48–49)
What This Means (2025 FDD)
According to Kitchen Solvers' 2025 Franchise Disclosure Document, operating leases are accounted for by including operating lease right-of-use (ROU) assets, other current liabilities, and operating lease liabilities on the company's balance sheets. The ROU assets represent Kitchen Solvers' right to use an asset for the lease term, while the lease liabilities represent the obligation to make lease payments. These assets and liabilities are recognized at the lease commencement date, based on the present value of lease payments over the lease term.
Kitchen Solvers uses the implicit rate when readily determinable to calculate the present value of lease payments. The operating lease ROU assets also include any lease payments made, excluding any lease incentives received. Lease expense for these payments is recognized on a straight-line basis over the lease term. The company's lease terms may include options to extend or terminate the lease if it is reasonably certain that they will exercise the option.
Notably, Kitchen Solvers has elected the short-term lease recognition exemption for leases with an initial term of 12 months or less that do not include an option to purchase the underlying asset, provided they are reasonably certain not to exercise that option. These short-term leases are not recorded on the balance sheet. In 2024, the Right of use asset - Operating leases was valued at $13,203, with operating lease liability - Current at $13,578. This indicates that Kitchen Solvers primarily utilizes short-term leases that meet the exemption criteria.