What accounting principles must Cream's management adhere to when preparing the financial statement?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
hise, LLC (the "Company") was organized in the State of Ohio on April 16, 2025 as a limited liability company. The purpose of the company is to franchise, develop, and foster the growth and expansion of the Jeni's franchising system. The Company is a wholly owned subsidiary of Jeni's Splendid Ice Creams, LLC (the "Parent").
The Company uses the accrual basis of accounting and operates on a 52-/53-week fiscal year.
Under an Intercompany Trademark License Agreement with the Parent, the Company has a limited nonexclusive right to use the Licensed Marks in connection with its operations. As of May 29, 2025, the Company has not signed any franchise agreements.
Note 2 - Significant Accounting Policies
Basis of Presentation
The financial statement of the Company has been prepared on the basis of generally accepted accounting principles (GAAP). The preparation of a financial statement in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in the financial statement. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all investments with an original maturity of three months or less when purchased to be cash equivalents. At May 29, 2025, the Company held cash of $300,000.
The Company maintains its cash in bank deposit accounts that at times may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risks on cash or cash equivalents.
Income Taxes
The Company is treated as a partnership for federal income tax purposes. Consequently, federal income taxes are not payable or provided for by the Company. The member is taxed on the Company's earnings. The Company's net income or loss is allocated to the member in accordance with the Company's operating agreement.
Commitments and Contingencies
The Company may be subject to various claims, legal actions, and complaints arising in the ordinary course of business. In accounting for legal matters and other contingencies, the Company follows the guidance in ASC 450, Contingencies, under which loss contingencies are accounted for based upon the likelihood of incurrence of a liability. If a loss contingency is probable and the amount of loss can be reasonably estimated, it is accrued.
If a loss contingency is probable but the amount of loss cannot be reasonably estimated, disclosure is made. If a loss contingency is reasonably possible, disclosure is made, including the potential range of loss, if determinable. Loss contingencies that are remote are neither accounted for nor disclosed.
The Company had no losses recorded as of May 29, 2025.
Related Party Relationship
The only costs incurred to date are the legal and professional fees to draft the franchise disclosure document, which were paid by the Parent on behalf of the Company.
Source: Item 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, the company's financial statements are prepared following accounting principles generally accepted in the United States of America (GAAP). This means Cream's management must make estimates and assumptions that could affect the reported amounts in the financial statements, and actual results could differ from these estimates. Cream uses the accrual basis of accounting and operates on a 52-/53-week fiscal year. As a limited liability company, Cream is treated as a partnership for federal income tax purposes, so federal income taxes are not payable by the company; instead, the member is taxed on the company's earnings.
Cream may be subject to claims, legal actions, and complaints, accounted for under ASC 450, Contingencies. Loss contingencies are accounted for based on the likelihood of incurring a liability. If a loss is probable and reasonably estimable, it is accrued. If probable but not reasonably estimable, disclosure is made. If reasonably possible, disclosure is made, including the potential range of loss if determinable. Remote loss contingencies are neither accounted for nor disclosed. As of May 29, 2025, Cream had no losses recorded.
As a franchisee, you must establish and maintain a bookkeeping, accounting, and recordkeeping system that conforms to Cream's requirements and formats. You must also deliver additional financial records, including profit and loss statements, operating statements, cash flow statements, statistical reports, bank activity reports, and tax records, at specified intervals and formats. These reports and financial statements must be verified and signed as prescribed by Cream, and all records must be preserved and maintained in a secure location for at least three years or as required by applicable law. Cream may also require you to use specific software and a standard chart of accounts for your shop's accounting and bookkeeping records.