What is the typical lease term length for My Salon Suite locations?
My_Salon_Suite Franchise · 2025 FDDAnswer from 2025 FDD Document
zed over the shorter of the life of the lease or the useful life of the assets. Total fixed assets are inclusive of construction in process of $3,339,301 and $1,905,869 at December 31, 2024 and 2023, respectively, and is primarily included in leasehold improvements. Depreciation expense was $3,935,437 and $2,652,140 for the years ended December 31, 2024 and 2023, respectively.
5. Leases
The Company primarily leases commercial retail space associated with its MY SALON Suite brand and subleases compartmentalized suites to beauty professionals at a weekly rate for periods of generally one year. The lessee arrangements account for the significant portion of the lease liabilities and right-of-use assets on the consolidated balance sheet. The lessor arrangements and the applicable accounting guidance are more fully explained in this report under Revenue Recognition.
The base terms for most of our lease arrangements typically do not extend beyond 10 years. We commonly have renewal options in our leases in 5-year increments that are generally included in the calculated lease liabilities and associated right-of-use assets. All of the renewal options considered for future lease liabilities are associated with the MY SALON Suite brand, which can have significant construction costs due to their highly compartmentalized footprint with generally semipermanent fixtures that are not easily moved into a new space. Due to these factors, it is almost always more economically feasible to stay in the leased space and make cosmetic updates versus moving to a new space.
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 company primarily leases commercial retail space and subleases suites to beauty professionals, generally for one-year periods. The base terms for most of their lease arrangements typically do not extend beyond 10 years.
My Salon Suite commonly includes renewal options in their leases, typically in 5-year increments. These renewal options are generally factored into the calculated lease liabilities and associated right-of-use assets. The document indicates that due to the significant construction costs associated with My Salon Suite locations, which feature a highly compartmentalized footprint and semi-permanent fixtures, it is often more economical to remain in the existing leased space and make cosmetic updates rather than relocating.
The weighted average remaining lease term for operating leases was 14 years as of both December 31, 2024 and December 31, 2023. The weighted average remaining lease term for financing leases was 4 years as of December 31, 2024, and 5 years as of December 31, 2023. Short-term leases with an initial term of 12 months or less are not recognized as lease liabilities and right-of-use assets in the consolidated balance sheets.