What reduces the amounts owed from Operations to the Company by Big Apple Bagels?
Big_Apple_Bagels Franchise · 2025 FDDAnswer from 2025 FDD Document
,800, $14,600 and $19,200, respectively.
A License Agreement between the Company and Inc for the Company's use of the BAB trademark owned by Inc commenced on December 1, 2003 for a term of 10 years with automatic renewals for a five-year period until the Company notifies Inc in writing 120 days prior to renewal that it wishes to terminate the Agreement. The Agreement was automatically renewed through December 1, 2023. The Company is to pay Inc a license fee of 28% on the first $3,000,000 of revenue earned by the Company for each fiscal year and 50% for any revenue in excess of $3,000,000. All revenues are subject to a license fee. The expense in connection with this License Agreement to the Company for 2024, 2023 and 2022 was $603,400, $572,200, and $540,600, respectively.
The balances owed to the Company by Operations and Inc. are considered contra-equity accounts because funds in Operations and Inc are limited.
Source: Item 23 — RECEIPTS (FDD pages 87–319)
What This Means (2025 FDD)
According to Big Apple Bagels' 2025 Franchise Disclosure Document, the amounts owed from Operations to the Company are reduced by the utilization of net operating loss carryovers that were generated by Operations. These balances are further affected by allocations of expenses and the tax effect of net operating loss utilization.
As of November 30, 2024, Operations owed the Company $2,714,800, while on November 30, 2023, the amount owed was $2,557,500. These figures indicate the financial relationship between Operations and the Company, with the net operating loss carryovers playing a crucial role in reducing the outstanding balances.
For a prospective Big Apple Bagels franchisee, understanding these accounting practices is essential for interpreting the financial statements of the franchise. The use of net operating loss carryovers can significantly impact the reported amounts owed, and it's important to consider how these accounting mechanisms affect the overall financial health of the franchise system.