How are inventories stated for Crave Cookies?

According to the 2025 Crave Cookies FDD, the company's inventories, which consist of cookie boxes, are valued at the lower of cost or net realizable value. This means that Crave Cookies assesses the value of its cookie box inventory by considering both the original cost and the potential revenue that could be earned from selling the boxes, and then records the lower of the two amounts. This approach ensures that the inventory is not overstated on the company's financial statements.

The FDD further specifies that the costs of these cookie boxes are determined using the first-in, first-out (FIFO) method. Under the FIFO method, it is assumed that the first cookie boxes purchased are the first ones sold. Therefore, the cost of goods sold will reflect the cost of the oldest inventory, while the remaining inventory on the balance sheet will reflect the cost of the most recently purchased cookie boxes. This method is commonly used because it is straightforward and often aligns with the actual flow of inventory.

For a prospective Crave Cookies franchisee, understanding these accounting policies is important for interpreting the franchisor's financial statements. It provides insight into how the company values its inventory and manages its cost of goods sold. While this information pertains to the franchisor's accounting practices, franchisees may find it useful to inquire about inventory management practices and expected spoilage rates for ingredients at the franchise level during their due diligence.