When preparing Carvel's consolidated financial statements, what evaluation is management required to perform regarding the company's ability to continue as a going concern?

According to Carvel's 2025 Franchise Disclosure Document, when preparing consolidated financial statements, management must evaluate whether any conditions or events, when considered together, raise significant doubts about the company's ability to continue operating as a going concern for one year after the consolidated financial statements are issued. This evaluation is a standard accounting practice.

This "going concern" assessment is crucial for prospective Carvel franchisees because it provides insight into the financial stability of the parent company, GoTo Foods Systems LLC. If there are substantial doubts about the company's ability to continue as a going concern, it could impact Carvel's ability to support its franchisees, invest in the brand, and fulfill its obligations under the franchise agreement.

It is important to note that this evaluation is based on conditions and events known at the time the financial statements are prepared. Future events or changes in circumstances could affect the company's ability to continue as a going concern. Therefore, while the evaluation provides a snapshot of the company's financial health, it is not a guarantee of future performance. Prospective franchisees should review the consolidated financial statements and related notes carefully, and consider seeking professional financial advice to assess the potential risks and rewards of investing in a Carvel franchise.