How does Lees Famous Recipe account for goodwill, specifically regarding amortization?

According to Lees Famous Recipe's 2025 Franchise Disclosure Document, goodwill, which represents the excess of the cost of acquiring assets and liabilities over their fair value at the time of acquisition, is amortized using a straight-line basis over a period of ten years. This accounting method is specifically elected for nonpublic companies. This means that the initial value of goodwill is gradually expensed over ten years, providing a consistent and predictable reduction in its book value.

For a prospective Lees Famous Recipe franchisee, understanding how goodwill is accounted for is important if they plan to acquire existing Lees Famous Recipe restaurants or assets from the company. The amortization of goodwill impacts the financial statements of Artemis Restaurant Corp., the parent company of LFR Chicken, which could indirectly affect franchisees through changes in fees or required financial reporting.

Additionally, the FDD states that goodwill is evaluated for impairment only when a triggering event occurs. This means that Lees Famous Recipe does not routinely assess the value of goodwill unless there is a significant event that suggests its value may have declined. This approach could lead to a sudden recognition of impairment losses if a triggering event reveals that the goodwill is no longer worth its carrying value. Franchisees should be aware of these accounting practices as they reflect the financial management and reporting strategies of the franchisor.