How does Auntie Annes account for income taxes?
Auntie_Annes Franchise · 2024 FDDAnswer from 2024 FDD Document
The Company is comprised of single-member limited liability companies for federal and state income tax purposes with all income tax liabilities and/or benefits of the Company being passed through to an indirect parent of the Company. As such, no recognition of federal or state income taxes for the Company has been provided for in the accompanying consolidated financial statements.
Income tax expense is comprised of foreign income taxes in certain international jurisdictions which arise from withholding taxes associated with payments of royalties and fees by international franchisees.
Source: Item 23 — RECEIPTS (FDD pages 106–366)
What This Means (2024 FDD)
According to Auntie Annes's 2024 Franchise Disclosure Document, the company is comprised of single-member limited liability companies for federal and state income tax purposes. As such, all income tax liabilities and/or benefits of the company are passed through to an indirect parent company. Therefore, the consolidated financial statements do not include recognition of federal or state income taxes for Auntie Annes. However, income tax expenses do include foreign income taxes in certain international jurisdictions, which arise from withholding taxes associated with payments of royalties and fees by international franchisees.
For a prospective Auntie Annes franchisee, this means that the company's income taxes are handled at the parent level for federal and state purposes. The franchisee should be aware that while Auntie Annes itself doesn't pay federal or state income taxes directly, foreign income taxes related to international franchise operations are still accounted for. These taxes stem from royalty and fee payments made by international franchisees.
Additionally, the FDD notes that the company is subject to state franchise taxes in certain states, which are based on either income or equity. These franchise tax expenses are recorded under selling, general, and administrative expenses. The company is also subject to withholding taxes in certain international jurisdictions. The company recognizes interest and penalties related to tax positions in income tax expense.
Furthermore, the document states that a tax position is recognized as a benefit only if it is more likely than not that the tax position would be sustained in a tax examination. The amount recognized is the largest amount of tax benefit that has a greater than 50% cumulative likelihood of being realized on examination. For tax positions not meeting the "more likely than not" test, no tax benefit is recorded. The company recognized no material amounts for uncertain tax positions during the fiscal years ended December 31, 2023 and December 25, 2022.