When does the non-cancelable operating lease for Stretch Zone's office space and training facility terminate?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
Senior Facility Agreement and Waiver. See Note L Subsequent Events.
NOTE H - LEASE COMMITMENTS
In March 2021, the Company commenced a non-cancelable operating lease for office space and a training facility for ninety-one months terminating in 2028. The Company is required to pay a proportionate share of the landlord's operating expenses. Rent for the facility commenced on May 1, 2021 for a total of $9,873 a month with stated annual increases of approximately three percent, with rent concessions of $6,037 a month for the first twelve months, $6,218 for the thirteenth month and $1,133 a month for an additional thirteen months. The Company also recognized on January 1, 2022 an operating lease liability of $826,511, which represents the present value of the remaining operating lease payments, discounted using the risk-free rate of 1.45%, and a right-of-use asset of $781,891, which represents the operating lease liability of $826,511 adjusted for deferred rent of $44,620.
The Company is a party to a lease for the franchise that they acquired and sold in 2020 from a former franchise owner. The franchise location has a five-year lease with the landlord which they have subleased to the franchise owner effective August 2020, on a month-to-month agreement based on the contractual amount plus sales tax and common area maintenance due to the landlord. The lease agreement was signed on February 27, 2020 with a term of five years, starting at $4,075, plus taxes and common areas maintenance with a three percent rent increase on an annual basis. The Company recognized a right-of-use asset of $157,837, and an operating lease liability of $157,837, discounted using the risk-free rate of 0.88% related to the franchise location.
Source: Item 3 — Franchisee/Debtor's Warranties. (FDD pages 263–364)
What This Means (2025 FDD)
According to Stretch Zone's 2025 Franchise Disclosure Document, the company commenced a non-cancelable operating lease in March 2021 for its office space and training facility. The initial term of this lease was for ninety-one months, with an original termination date set for 2028. This lease requires Stretch Zone to cover a proportionate share of the landlord's operating expenses. The rent payments began on May 1, 2021, at $9,873 per month, with annual increases of approximately three percent. The lease included rent concessions of $6,037 per month for the first twelve months, $6,218 for the thirteenth month, and $1,133 per month for an additional thirteen months.
However, the lease was amended in July 2024 to modify and extend the term by three years and include additional space. In compensation for leasehold improvements for the additional space, Stretch Zone increased its payment to the landlord by $20,242 for the period from August 2024 through December 2024. The landlord also provided additional rent concessions from August 2024 through December 2024 of $10,788 per month. The commencement date for the additional space was communicated to Stretch Zone on February 17, 2025, which triggered a revaluation of the right-of-use asset and the lease liability.
Accounting for the amendment, the operating lease liability was modified to $912,840, and the right-of-use asset to $967,501, with payments discounted using a risk-free rate of 4.28% at the amendment date. As of December 31, 2024, the weighted average years outstanding on the remaining lease was 6.45 years. While the original lease was set to terminate in 2028, the amendment in July 2024 extended the term by three years. Therefore, the termination date of the lease is extended beyond 2028, but the exact year is not specified.