How are Crave Cookies' inventories stated?

According to Crave Cookies' 2025 Franchise Disclosure Document, the company's inventories, which consist of cookie boxes, are stated at the lower of cost or net realizable value. The costs of these cookie boxes are determined using the first-in, first-out (FIFO) method. This accounting policy is detailed in the notes to the financial statements.

For a prospective Crave Cookies franchisee, this means that the value of their cookie box inventory will be recorded based on whichever is lower: the original cost or the net realizable value (the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation). The FIFO method assumes that the first units purchased are the first ones sold. This can impact the franchisee's reported profits and taxes, especially during times of fluctuating costs.

This is a fairly standard accounting practice. Using the lower of cost or net realizable value ensures that inventory is not overstated on the balance sheet. The FIFO method is also a common inventory costing method, particularly suitable for perishable goods or items with a short shelf life, as it aligns with the physical flow of inventory. Franchisees should understand these accounting principles to effectively manage their inventory and financial reporting.