How are My Salon Suite's leasehold improvements amortized?
My_Salon_Suite Franchise · 2025 FDDAnswer from 2025 FDD Document
| | 2023 | 2022 | |----------------------------------------------------------------------------------------------------|-------------------------------------|--------------------------| | Furniture, equipment and internally developed software Leasehold improvements | $ 6,730,068 $ 12,825,113 | 5,569,044 8,058,589 | | Total | 19,555,181 | 13,627,633 | | fixed | | | | assets | | | | Less: accumulated depreciation Fixed assets, net | (6,593,875) $ $ 12,961,306 | (3,630,800) 9,996,833 | The furniture, equipment and developed software have an expected life of three to five years, and leasehold improvements are amortized over the shorter of the life of the lease or the useful life of the assets. Total fixed assets is inclusive of construction in process of $1,905,869 and $726,636 at December 31, 2023 and 2022, respectively, and is primarily included in leasehold im
Source: Item 6 — Other Intangibles and Goodwill (FDD pages 274–314)
What This Means (2025 FDD)
According to My Salon Suite's 2025 Franchise Disclosure Document, leasehold improvements are amortized over the shorter of the life of the lease or the useful life of the assets. This means that My Salon Suite will use the shorter timeframe to depreciate the value of improvements made to the leased property.
For a prospective franchisee, this is important for understanding the financial accounting of the business. Leasehold improvements are essentially any upgrades or modifications made to the leased space to make it suitable for My Salon Suite's operations. These improvements are considered assets, but their value decreases over time (depreciates). The depreciation expense was $2,652,140 for the year ended December 31, 2023, and $1,957,467 for the year ended December 31, 2022.
The amortization method impacts the reported profitability of the My Salon Suite franchise. By using the shorter of the lease term or the asset's useful life, the company may recognize depreciation expense more quickly. This can reduce taxable income in the early years of the lease but also means that the assets will be fully depreciated sooner. Total fixed assets is inclusive of construction in process of $1,905,869 and $726,636 at December 31, 2023 and 2022, respectively, and is primarily included in leasehold improvements.
This approach is fairly standard in accounting. It is designed to match the expense of the asset with the period in which it provides benefit to the business. Franchisees should consult with a financial advisor to fully understand the implications of this amortization method on their specific financial situation and tax obligations.