According to the 2025 FDD, Capriottis Sandwich Shop reviews long-lived assets for impairment whenever events or changes in circumstances suggest that the carrying amount of an asset may not be recoverable. This means that the company doesn't follow a fixed schedule (like annually or quarterly) but instead assesses assets when specific triggers occur. These triggers could be a sudden drop in revenue, a change in market conditions, or physical damage to an asset.

To determine if an asset's value is recoverable, Capriottis Sandwich Shop compares the asset's carrying amount (its book value) to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount exceeds these expected cash flows, the company recognizes an impairment charge. The impairment charge is the difference between the asset's carrying amount and its fair value, reflecting the actual loss in value.

For a prospective franchisee, this policy means that the value of assets like equipment, furniture, and leasehold improvements at their Capriottis Sandwich Shop location could be adjusted downwards if their performance declines or if market conditions worsen. While the FDD states that Capriottis Sandwich Shop recorded no impairment charges for the years ended December 29, 2024, and December 31, 2023, this does not guarantee future performance. Franchisees should understand that the value of their assets is subject to review and potential adjustment based on the ongoing performance of their business.

This approach is consistent with standard accounting practices, which require companies to regularly assess the value of their assets and make adjustments when necessary to accurately reflect their financial position. By reviewing long-lived assets for impairment based on specific events or changes in circumstances, Capriottis Sandwich Shop aims to ensure that its financial statements provide a fair and accurate representation of its assets' value.