How much was due from a related party to Craters & Freighters as of December 31, 2023?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
security agreement.
Note 6: Related Party Transactions
The Company provides shared services and advances to a related party, Craters & Freighters Platinum, through common ownership. Total amounts paid to the Company for shared services during the year ended December 31, 2024 totaled $175,268, of which, $41,921 is shown in the financial statements as a reduction of rent expense. During the year ended December 31, 2023 total amounts paid to the Company for shared services totaled $307,386, of which, $17,386 is shown in the financial statements as a reduction of rent expense. As of December 31, 2024 and 2023, the Company was owed $0 and $356,391, respectively from Craters & Freighters Platinum. Due to the short-term nature of these borrowings, interest is not charged on the outstanding balance.
Notes to Financial Statements
Note 6: Related Party Transactions (Continued)
During the year ended December 31, 2024, the Company engaged in transactions with a company in which a board member holds a significant ownership interest. Total amount paid to this related party during the year ended December 31, 2024 was $236,500 and total amount due at December 31, 2024 was $65,000. During the year ended December 31, 2023 total amounts paid to this related party totaled $84,713. No amounts were due at December 31, 2023.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 49)
What This Means (2025 FDD)
According to the 2025 Craters & Freighters Franchise Disclosure Document, as of December 31, 2023, Craters & Freighters was owed $356,391 from Craters & Freighters Platinum, a related party. This amount arose from shared services and advances provided by Craters & Freighters to Craters & Freighters Platinum, which has common ownership with the company.
This type of related-party transaction is not uncommon, but it's important for prospective franchisees to understand the nature of these relationships and how they might affect the financial health of Craters & Freighters. The FDD notes that due to the short-term nature of these borrowings, interest is not charged on the outstanding balance.
It is important to note that the financial statements also show transactions with another company in which a board member holds a significant ownership interest. During the year ended December 31, 2023 total amounts paid to this related party totaled $84,713. No amounts were due at December 31, 2023. A prospective franchisee should seek clarification from Craters & Freighters regarding the details of these related-party transactions, including the services provided and the terms of the arrangements, to ensure they are conducted at arm's length and do not pose any financial risks.