How does the loss on investment in unconsolidated entities impact Camp Margaritaville's overall profitability?
Camp_Margaritaville Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company has investments in unconsolidated entities. The Company does not control these entities and uses the equity or cost method to account for these investments. For equity investments accounted for using the equity method, the Company records its share of the income or loss from each entity in the fiscal year in which each entity's year-end occurs. Equity securities without a readily determinable fair value are recorded at cost less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer. Refer to Note 5 for further explanation of these investments in unconsolidated entities.
Notes to Consolidated Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Fiscal Year-End
The Company reports results of operations on a calendar-year basis.
Revenue Recognition
Source: Item 23 — RECEIPTS (FDD pages 72–406)
What This Means (2025 FDD)
According to Camp Margaritaville's 2025 Franchise Disclosure Document, the company's investments in unconsolidated entities are accounted for using either the equity or cost method. The document indicates that Camp Margaritaville records its share of income or loss from these entities in the fiscal year in which the entity's year-end occurs. Equity securities without a readily determinable fair value are recorded at cost less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer. Note 5 of the FDD provides further explanation of these investments.
The FDD details an instance where Camp Margaritaville owned a 3.2% interest in 560 MV Hotel LLC, a resort in New York, starting February 5, 2018. Camp Margaritaville did not have significant influence over this entity, and the investment was accounted for at cost less impairment. In October 2023, the majority owner of the resort foreclosed on its loan agreement, and in December 2023, the lender assumed control of the property. Consequently, Camp Margaritaville lost its ownership interest and fully impaired its investment in the property.
The investment account for 560 MV Hotel LLC was $0 for the year ended December 31, 2024, and also $0 for the year ended December 31, 2023. However, the investment account for 560 MV Hotel LLC was $2,000,000 for the year ended December 31, 2022. The impairment loss is reflected as a net loss on investments in unconsolidated entities on the consolidated statements of operations. This loss negatively impacts Camp Margaritaville's overall profitability, as it represents a write-down of an asset and reduces the company's net income.