Do the Crave Cookies financial statements include any discussion of critical accounting policies?
Crave_Cookies Franchise · 2025 FDDAnswer from 2025 FDD Document
| Right-of-use assets obtained in exchange | | | | | | for new operating lease liabilities | $ | 19,560 | S | |
Note 1. Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
Crave Cookies Franchising, LLC (the Company) formed on February 15, 2021 under the laws of the state of Utah as a Utah corporation.
The Company is a franchise company for Crave Cookies locations. The Company grants franchisees the right to operate a physical storefront location using the Crave Cookies name and marks.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Accounts Receivable
Accounts receivable are stated at the amount of consideration from customers of which the Company has an unconditional right to receive. The Company provides an allowance for credit losses, which is based upon a review of outstanding receivables, historical collection information and existing economic conditions. As of December 31, 2023 and 2022, there was no allowance for credit losses recorded.
Generally, the Company does not charge interest on past due accounts. Delinquent receivables are written off based on individual credit evaluation and specific circumstances of the customer. During the years ended December 31, 2023 and 2022, credit loss expense related to doubtful accounts receivable, where collectability is not reasonably assured, was $5,000 and $0, respectively.
Inventories
Inventories consist of cookie boxes. Inventories are stated at the lower of cost or net realizable value. Costs of cookie boxes are determined using the first-in, first-out (FIFO) method.
Notes Receivable - Related Party
Notes receivable represent amounts due from a related party for operating expenses and other fees that the Company paid on behalf of the related party. The terms of the note are non-interest bearing and due on demand. The related party is owned 100% by the owners of the Company.
Prepaid Expen
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 47)
What This Means (2025 FDD)
According to Crave Cookies' 2025 Franchise Disclosure Document, the financial statements include a discussion of significant accounting policies. Specifically, Note 1 to the financial statements addresses the nature of operations and summarizes these significant accounting policies. This is a standard practice, as it provides transparency into how the company's financials are prepared and ensures consistency in reporting.
The accounting policies discussed in the notes cover several key areas. These include the use of estimates in preparing the financial statements, which acknowledges that management makes assumptions that can affect reported amounts. It also covers how accounts receivable are handled, including the allowance for credit losses. Additionally, the policy addresses how inventories (cookie boxes) are valued, using the first-in, first-out (FIFO) method. Notes receivable from related parties, prepaid expenses, and property and equipment are also discussed.
For a prospective Crave Cookies franchisee, understanding these accounting policies is crucial. It provides insight into how the franchisor manages its finances and reports its performance. For example, the mention of credit loss expense related to doubtful accounts receivable indicates the company's experience with franchisees who may not be able to pay what they owe. In 2023, Crave Cookies recorded $5,000 in credit loss expense, while there was none in 2022. This information can help a franchisee assess the financial stability and management practices of the franchisor.