Do the Crave Cookies financial statements include any discussion of risks and uncertainties?
Crave_Cookies Franchise · 2025 FDDAnswer from 2025 FDD Document
y 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.
Concentrations of Credit Risk - Financial instruments which potentially subject the Company to concentration of credit risk consist primarily of receivables. In the normal course of business, the Company provides credit terms to its customers. Accordingly, the Company performs ongoing credit evaluations of its customers and maintains allowances for possible losses which, when realized, have been within the range of management's expectations.
The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk with respect to cash and cash equivalents. As of December 31, 2024 the Company did not have cash balances over the federally insured limit.
Cash and Cash Equivalents - For purposes of the statement of cash flows, the Company considers all short-term investments with an original maturity of three months or less to be cash equivalents.
Contract receivables - 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, 2024, 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 year ended December 31, 2024, there was no credit loss expense related to doubtful accounts receivable, where collectability was not reasonably assured.
Inventory - inventory consist of cookie boxes.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 47)
What This Means (2025 FDD)
According to Crave Cookies' 2025 Franchise Disclosure Document, the financial statements do include discussions of risks and uncertainties, primarily within the notes to the financial statements. Specifically, Note 1 addresses the use of estimates in preparing the financial statements, acknowledging that management must make estimates and assumptions that could affect the reported amounts of assets, liabilities, revenues, and expenses. Actual results could differ from these estimates. This is a standard disclosure reflecting the inherent uncertainty in financial reporting. Also, the auditors' report mentions their responsibility to assess the risks of material misstatement of the financial statements, whether due to fraud or error.
The notes also discuss concentrations of credit risk related to receivables. While Crave Cookies provides credit terms to customers, they perform credit evaluations and maintain allowances for possible losses. The company also maintains cash in bank deposit accounts, which at times may exceed federally insured limits; however, as of December 31, 2024, the company did not have cash balances over the federally insured limit. Furthermore, the independent auditor's report outlines the auditor's responsibilities, including assessing the risk of material misstatement, evaluating accounting policies, and concluding whether there are conditions that raise substantial doubt about Crave Cookies' ability to continue as a going concern.
For a prospective Crave Cookies franchisee, these disclosures highlight the importance of understanding the estimates used in the financial statements and the potential for actual results to vary. While the company appears to manage credit risk and cash balances prudently, franchisees should be aware of these factors and consider them in their financial planning. The auditor's report provides assurance that the financial statements are fairly presented, but it also acknowledges the inherent limitations of an audit and the possibility of undetected misstatements. Franchisees should consult with their own financial advisors to fully understand the implications of these risks and uncertainties.