What does 7 Brew consider to be cash equivalents?
7_Brew Franchise · 2025 FDDAnswer from 2025 FDD Document
ittle or no market activity and that are significant to the fair value of the assets or liabilities
The carrying amounts of cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses and other current liabilities, approximate fair value due to their short-term maturities.
Cash and Cash Equivalents
The Company considers all liquid investments with original maturities of three months or less to be cash equivalents. The Company maintains its cash and cash equivalents in bank accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. Management believes the Company is not exposed to any significant credit risk on its cash balances. As of December 29, 2024, December 31, 2023 and December 25, 2022, the Company had approximately $22
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 82)
What This Means (2025 FDD)
According to 7 Brew's 2025 Franchise Disclosure Document, the company considers "all liquid investments with original maturities of three months or less to be cash equivalents." This is a standard accounting practice. Cash equivalents are short-term, highly liquid investments that can be easily converted to cash and are subject to an insignificant risk of changes in value.
7 Brew maintains its cash and cash equivalents in bank accounts, which at times may exceed federally insured limits. As of December 29, 2024, December 31, 2023, and December 25, 2022, the company had approximately $22.6 million, $1.9 million, and $3.4 million, respectively, in excess of these limits. However, 7 Brew states that it has not experienced any losses in such accounts and management believes the company is not exposed to any significant credit risk on its cash balances.
For a prospective franchisee, this definition is important because it provides insight into how 7 Brew manages and reports its liquid assets. Understanding the company's cash management practices can help franchisees assess the financial stability and risk management strategies of the franchisor. The amounts exceeding federally insured limits may be a point of interest, but 7 Brew claims they have not had any losses.