What do the inventories of Crave Cookies consist of?

According to the 2025 Crave Cookies FDD, the company's inventories consist of cookie boxes. These inventories are valued at the lower of their cost or net realizable value. The cost of these cookie boxes is determined using the first-in, first-out (FIFO) method.

For a prospective Crave Cookies franchisee, this means that the primary inventory they will need to manage is the supply of cookie boxes. The valuation method, FIFO, assumes that the first boxes purchased are the first ones sold, which can impact how the cost of goods sold is calculated and, consequently, the reported profits. This is a standard accounting practice, but it's important for franchisees to understand how it affects their financial statements.

Furthermore, the valuation of inventories at the lower of cost or net realizable value is a conservative approach. Net realizable value refers to the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. If the market value of the cookie boxes declines below their original cost, Crave Cookies will write down the inventory to reflect this lower value, which could impact profitability. Franchisees should monitor their inventory levels and market conditions to avoid potential write-downs.