Does the Crave Cookies Statement of Cash Flows include information about lease payments?
Crave_Cookies Franchise · 2025 FDDAnswer from 2025 FDD Document
d not elect the hindsight practical expedient in determining the lease term for existing leases as of January 1, 2022.
The most significant impact of adoption was the recognition of operating lease ROU assets and operating lease liabilities of $11,758. The standard did not significantly affect the Company's statements of operations or cash flows.
Accounting Policies
The Company determines if an arrangement is a lease or contains a lease at inception. Leases result in the recognition of ROU assets and lease liabilities on the balance sheets. ROU assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease, measured on a discounted basis. The Company determines lease classification as operating or finance at the lease commencement date.
At lease commencement, the lease liability is measured at the present value of the lease payments over the lease term. The ROU asset equals the lease liability adjusted for any initial direct costs, prepaid or deferred rent, and lease incentives. The Company has made a policy election to use a risk-free rate (the rate of a zero-coupon U.S. Treasury instrument) for the initial and subsequent measurement of all lease liabilities. The risk-free rate is determined using a period comparable with the lease term.
The lease term may include options to extend or to terminate the lease that the Company is reasonably certain to exercise. Lease expense is generally recognized on a straight-line basis over the lease term.
Notes to Financial Statements December 31, 2022 and 2021
The Company has elected not to record leases with an initial term of 12 months or less on the balance sheets. Lease expense on such leases is recognized on a straight-line basis over the lease term.
Nature of Leases
The Company has entered into the following lease arrangements:
Operating Leases
The Company leases a vehicle that expires in 2023 and has monthly payments of $674.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 47)
What This Means (2025 FDD)
According to Crave Cookies' 2025 Franchise Disclosure Document, the company's financial statements do include information about lease payments. Specifically, the notes to the financial statements discuss the accounting policies related to operating leases, indicating that Crave Cookies recognizes Right-of-Use (ROU) assets and lease liabilities on its balance sheets for leases exceeding 12 months. These lease liabilities represent the obligation to make lease payments, measured on a discounted basis.
The notes also mention that Crave Cookies had a vehicle lease that expired in 2023 with monthly payments of $674 and entered into a new vehicle lease in 2023 that expires in 2025 with monthly payments of $576. The adoption of accounting standards for leases resulted in the recognition of operating lease ROU assets and operating lease liabilities of $11,758. However, the document states that the adoption of this standard did not significantly affect the company's statements of operations or cash flows.
For a prospective Crave Cookies franchisee, this information is relevant because it indicates how the franchisor accounts for its own leases, which can provide insight into how lease obligations might be handled in the franchisee's financial statements. Understanding the accounting treatment of leases is crucial for assessing the financial health and obligations of both the franchisor and the franchisee. Franchisees typically incur lease expenses for their store locations, so understanding how these are accounted for is essential for financial planning and management.