What was the total financing lease cost for My Salon Suite in 2024?
My_Salon_Suite Franchise · 2025 FDDAnswer from 2025 FDD Document
d on the Consolidated Balance Sheet as of December 31, 2024. Finance leases with a right-of-use asset value of $97,727 and a current and long-term portion lease liability value of $23,374 and $72,316 respectively are included in the values reported on the Consolidated Balance Sheet as of December 31, 2023.
Supplemental balance sheet information related to leases as of December 31 are as follows:
| 2024 | 2023 | |
|---|---|---|
| Weighted average remaining lease term (Years) Operating leases Financing leases | 14 |
Source: Item 17 — (r) of the FDD and Section 13 of the Franchise Agreement disclose the existence of certain covenants restricting competition to which Franchisee must agree. The Commissioner has held that covenants restricting competition contrary to Section 9-08-06 of the North Dakota Century Code, without further disclosing that such covenants may be subject to this statue, are unfair, unjust, or inequitable within the intent of Section 51-19-09 of the North Dakota Franchise Investment Law. The FDD and the Franchise Agreement are amended accordingly to the extent required by law. (FDD pages 230–274)
What This Means (2025 FDD)
According to My Salon Suite's 2025 Franchise Disclosure Document, the total financing lease cost for the year 2024 was $24,679. This figure represents the sum of amortization of right-of-use assets and interest on lease liabilities related to financing leases. In comparison, the total financing lease cost for the previous year, 2023, was $36,540.
Financing leases involve assets that My Salon Suite essentially owns over the lease term, as opposed to operating leases which are more like renting. The costs associated with these financing leases include the depreciation (amortization) of the right-of-use assets (the assets My Salon Suite is leasing) and the interest paid on the lease liabilities (the outstanding lease payments). These costs are important for understanding the overall financial obligations of My Salon Suite related to its leased assets.
For a prospective franchisee, understanding the difference between operating and financing leases is crucial. Operating leases, with costs of $7,479,255 in 2024, are typically for shorter terms and may be easier to exit, while financing leases represent a longer-term commitment. The weighted average remaining lease term for financing leases was 4 years as of December 31, 2024, with a weighted average discount rate of 4.2%. This information helps in assessing the long-term financial obligations and potential risks associated with My Salon Suite's leasing strategy.