How are the inventories of Crave Cookies 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.

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 actual cost to acquire the boxes or the net realizable value, which is 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 boxes purchased are the first ones sold. This can impact the franchisee's reported profits and taxes, especially during times of fluctuating costs.

This accounting practice is fairly standard. 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 helps to minimize the risk of obsolete inventory. Franchisees should maintain accurate inventory records to properly apply these accounting principles and to understand their financial performance.