How are royalties presented in Craters & Freighters' financial statements?

According to Craters & Freighters' 2025 Franchise Disclosure Document, the company's financial statements are prepared using the accrual basis of accounting, in accordance with accounting principles generally accepted in the United States of America (GAAP). This means that Craters & Freighters recognizes revenue when it is earned and expenses when they are incurred, regardless of when cash changes hands. The FDD mentions that the company's financial statements include balance sheets, statements of operations, shareholder's equity, and cash flows.

While the excerpt specifies that Craters & Freighters' revenue recognition policy includes 'Franchise Revenues', it does not provide specific details on how royalty revenues are presented or categorized within these financial statements. The excerpt focuses more on the general accounting principles and the scope of the auditor's review rather than the specific line items related to franchise royalties.

Therefore, a prospective Craters & Freighters franchisee should ask the franchisor for a detailed breakdown of how royalty revenues are reported in their financial statements. This includes understanding which line items on the income statement reflect royalty payments, and how these revenues are tracked and verified. Understanding the specifics of royalty revenue recognition will allow a franchisee to better assess the financial health and transparency of Craters & Freighters.