According to Carvel's FDD, what is included in 'Cash and cash equivalents'?

According to Carvel's 2025 Franchise Disclosure Document, the definition of 'Cash and cash equivalents' varies slightly between the two fiscal years presented. For the fiscal year ending December 29, 2024, and December 31, 2023, cash and cash equivalents consisted only of funds on deposit with commercial banks. However, another section of the FDD states that cash and cash equivalents includes highly liquid investments purchased with an original maturity of three months or less, consisting of funds on deposit with commercial banks and money market mutual fund accounts as of December 29, 2024, and December 31, 2023.

This discrepancy could be due to different accounting treatments or the level of detail presented in different sections of the FDD. It's important to note that 'Restricted Cash and Cash Equivalents' are treated separately and include cash and money market mutual fund accounts established with a financial institution (the Trustee) for the benefit of the Trustee and the holders of Senior Notes, or have been pledged to the Trustee, and are restricted in their use. This restricted cash is comprised of cash collections and cash reserves held by the Trustee for payments of principal, interest, and commitment fees required for the company's notes, as well as any other cash collections related to securitized franchising or licensing activities held in special-purpose, bankruptcy-remote subsidiaries.

For a prospective Carvel franchisee, understanding the composition of cash and cash equivalents is crucial for assessing the company's liquidity and financial health. The inclusion of money market funds in addition to bank deposits suggests a more diversified approach to managing short-term funds. However, the presence of restricted cash indicates that a portion of the company's cash is not freely available for general use, as it is earmarked for specific obligations related to debt and securitization activities. Franchisees should pay close attention to the amounts of both unrestricted and restricted cash to get a clear picture of Carvel's financial flexibility.

Given the differing definitions presented in the FDD, a prospective franchisee should seek clarification from Carvel regarding the precise components of 'Cash and cash equivalents' and the nature of any restrictions on those funds. Understanding these details will help in evaluating the financial stability of Carvel and its ability to support its franchisees.