What should management design, implement, and maintain regarding internal control relevant to the preparation and fair presentation of Crave Franchising, LLC's financial statements?

According to Crave's 2025 Franchise Disclosure Document, management is responsible for the design, implementation, and maintenance of internal controls relevant to the preparation and fair presentation of the company's financial statements. This ensures that the financial statements are free from material misstatement, whether due to fraud or error, and are presented fairly in accordance with accounting principles generally accepted in the United States of America. These financial statements include the balance sheets as of December 31, 2024, 2023, and 2022, and the related statements of operations, member's equity, and cash flows for the year ended December 31, 2024.

Internal controls are processes and procedures implemented by Crave to provide reasonable assurance regarding the reliability of financial reporting. These controls help to prevent and detect errors or fraud that could materially misstate the financial statements. Management's responsibility extends to ensuring that these controls are not only designed effectively but also consistently implemented and maintained over time. This involves establishing a control environment, assessing risks, implementing control activities, monitoring controls, and communicating information effectively.

For a prospective franchisee, this indicates that Crave's financial reporting should be reliable and transparent, as it is subject to internal controls and an independent audit. This can provide a level of confidence in the financial information presented in the FDD and during the franchise sales process. Franchisees may want to inquire about the specific internal controls in place and the processes used to ensure the accuracy and reliability of financial data. Understanding the strength of these controls can help franchisees assess the financial stability and management practices of the franchisor.

Furthermore, management is required to evaluate whether there are conditions or events that raise substantial doubt about Crave's ability to continue as a going concern for one year after March 24, 2025. This assessment is crucial for potential franchisees as it provides insight into the financial health and stability of Crave. If such doubts exist, it could impact the support and services Crave can provide to its franchisees. Therefore, understanding how Crave addresses these responsibilities is an important aspect of due diligence for any prospective franchisee.