What are 'deferred franchising costs' for Craters & Freighters, and how are they treated?

According to Craters & Freighters' 2025 Franchise Disclosure Document, deferred franchising costs are defined as the costs to obtain or fulfill a contract that are incremental and recoverable. These costs are capitalized, meaning they are recorded as assets on the balance sheet rather than expensed immediately. They are then amortized ratably, or in equal installments, over the term of the franchise agreement.

For a prospective Craters & Freighters franchisee, this means that certain costs incurred by the franchisor in setting up the franchise agreement are not immediately expensed but are instead spread out over the life of the agreement. This accounting treatment can affect the franchisor's reported profitability in the short term.

However, the FDD also states that Craters & Freighters did not have any notable deferred costs related to obtaining or fulfilling contracts as of December 31, 2024 and 2023. This suggests that these costs, if any, were immaterial during those periods. Franchisees may want to inquire whether Craters & Freighters anticipates having such costs in the future and how that might affect the company's financial performance.