How often does Carvel evaluate its tradenames for impairment?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
Intangible assets consist primarily of tradenames and franchise agreements. The Company does not amortize tradenames. Tradenames for each of the Franchising Entities are evaluated for impairment using a qualitative or quantitative assessment annually at year-end, or more frequently when circumstances arise indicating potential impairment. If a qualitative assessment is performed and the fair value of a tradename more likely than not exceeds the carrying value of the tradename, no further evaluation is necessary. If a quantitative assessment is performed and the fair value of a tradename exceeds the carrying value of the tradename, the tradename is not impaired. If the carrying value of the tradename exceeds the fair value of the tradename, an impairment charge is recorded for the difference.
The Company estimates fair value using multiple valuation methodologies, including discounted cash flow models. The operating assumptions used in the discounted cash flow models are generally consistent with past performance and with the projections and assumptions that are used in the current operating plan. Such assumptions are subject to change as a result of changing economic and competitive conditions.
No impairment losses were recorded for intangible assets during the fiscal years ended December 29, 2024, December 31, 2023, and December 25, 2022.
Source: Item 23 — Receipts (FDD pages 100–353)
What This Means (2025 FDD)
According to Carvel's 2025 Franchise Disclosure Document, the company evaluates its tradenames for impairment annually at year-end. However, Carvel may also conduct these evaluations more frequently if circumstances suggest a potential impairment. These evaluations involve either a qualitative or quantitative assessment to determine if the fair value of the tradename exceeds its carrying value.
During the evaluation, if Carvel performs a qualitative assessment and determines that the fair value of the tradename more likely than not exceeds its carrying value, no further evaluation is required. Conversely, if a quantitative assessment is performed and the fair value of the tradename exceeds its carrying value, the tradename is considered not impaired. However, if the carrying value of the tradename exceeds its fair value, Carvel records an impairment charge for the difference.
Carvel estimates fair value using various valuation methodologies, including discounted cash flow models. The operating assumptions used in these models are generally consistent with past performance and current operating plans, but they are subject to change due to economic and competitive conditions. The FDD states that no impairment losses were recorded for intangible assets during the fiscal years ended December 29, 2024, December 31, 2023, and December 25, 2022.