What valuation methodologies does Carvel use to estimate the fair value of its intangible assets?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
Intangible assets consist primarily of goodwill, tradenames, reacquired franchise rights, and franchise agreements. The Company does not amortize goodwill or tradenames. Goodwill and tradenames are evaluated for impairment using a qualitative or quantitative assessment annually at year-end, or more frequently when circumstances arise indicating potential impairment.
Goodwill and tradenames for each of the subsidiaries which are franchisors and operators of the Company SBRs (the "reporting units") are evaluated for impairment. If a qualitative assessment is performed and the fair value of a reporting unit's net assets or tradename more likely than not exceeds the carrying value of the reporting unit's net assets or tradename, respectively, no further evaluation is necessary. If a quantitative assessment is performed and the fair value of a reporting unit or tradename exceeds the carrying value of the reporting unit's net assets or tradename, respectively, the goodwill or tradename is not impaired. If the carrying value of the reporting unit's net assets or tradename exceeds the fair value of the reporting unit or tradename, respectively, 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 Company's current operating plan. Such assumptions are subject to change as a result of changing economic and competitive conditions.
No impairment losses were recorded for goodwill, tradenames, or amortizable intangible assets during the fiscal years ended December 29, 2024 and December 31, 2023.
Source: Item 23 — Receipts (FDD pages 100–353)
What This Means (2025 FDD)
According to Carvel's 2025 Franchise Disclosure Document, the company estimates the fair value of its intangible assets using multiple valuation methodologies, including discounted cash flow models. The intangible assets primarily consist of goodwill, tradenames, reacquired franchise rights, and franchise agreements. Carvel does not amortize goodwill or tradenames. These are evaluated for impairment annually or more frequently if circumstances suggest potential impairment.
Carvel conducts either a qualitative or quantitative assessment to determine impairment. If a qualitative assessment shows that the fair value of a reporting unit's net assets or tradename likely exceeds its carrying value, no further evaluation is needed. However, if a quantitative assessment is performed and the fair value exceeds the carrying value, the goodwill or tradename is not impaired. Conversely, if the carrying value exceeds the fair value, Carvel records an impairment charge for the difference.
The operating assumptions used in Carvel's discounted cash flow models are generally consistent with past performance and the projections used in the company's current operating plan. However, these assumptions are subject to change due to shifting economic and competitive conditions. For the fiscal years ended December 29, 2024, and December 31, 2023, no impairment losses were recorded for goodwill, tradenames, or amortizable intangible assets.