How does Crave Cookies depreciate its property and equipment?
Crave_Cookies Franchise · 2025 FDDAnswer from 2025 FDD Document
Property and equipment - Property and Equipment - property and equipment is stated at cost. Depreciation expense is calculated on the straight-line method in an amount sufficient to write off the cost of depreciable assets over their estimated useful lives, ranging from three to five years.
Normal maintenance and repair are charged to costs and expenses as incurred. The cost and accumulated depreciation of property and equipment sold or otherwise retired are removed from the accounts and gain or loss on disposition is reflected in the net income in the period of disposition.
Contract liabilities - contract liabilities represent the Company's obligation to transfer goods or services to a customer when consideration has been received from the customer. These consist of deferred franchise fee revenues on the balance sheet.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 47)
What This Means (2025 FDD)
According to Crave Cookies' 2025 Franchise Disclosure Document, property and equipment are recorded at cost, with depreciation calculated using the straight-line method. This method is applied to allocate the cost of depreciable assets over their estimated useful lives, which range from three to five years.
For a prospective Crave Cookies franchisee, understanding depreciation methods is crucial for financial planning and tax purposes. The straight-line method evenly distributes the cost of an asset over its useful life, providing a consistent depreciation expense each year. This can help in forecasting expenses and understanding the true cost of equipment over time. The estimated useful lives of three to five years for equipment means that franchisees can expect to fully depreciate these assets within that timeframe.
Additionally, the FDD notes that normal maintenance and repair costs are expensed as incurred, while the cost and accumulated depreciation of sold or retired property and equipment are removed from the accounts, with any gain or loss on disposition reflected in net income during that period. This is a standard accounting practice, but it's important for franchisees to keep accurate records of asset disposals to properly account for any gains or losses. Furthermore, Crave Cookies evaluates the recoverability of long-lived assets, and if the expected future cash flows are less than the carrying amount, the asset cost is adjusted to fair value, and an impairment loss is recognized.