How much did the Parent owe Crisp & Green as of December 31, 2023?
Crisp_Green Franchise · 2024 FDDAnswer from 2024 FDD Document
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NOTE 3 CONTRACT ASSETS AND CONTRACT LIABILITIES
The Company's contract assets and contract liabilities are as follows:
| December 31, | December 31, | December 31, | January 1, | |
|---|---|---|---|---|
| 2023 | 2022 | 2021 | 2021 | |
| Contract Assets: | $ | $ | $ | $ |
| Accounts Receivable | 519,829 | 2,164,457 | 744,194 | 85,375 |
| Contract Liabilities: | 7,412,300 | 8,175,200 | 4,496,300 | 983,400 |
| Deferred Franchise Fees |
NOTE 4 TRANSACTIONS WITH RELATED PARTIES
The Company has an agreement with the Parent to provide training, marketing, and administrative support in exchange for a management fee. The management fee incurred by the Company was approximately $1,045,500 for the year ended December 31, 2023 and $500,000 for the years ended December 31, 2022 and 2021, and is included in general and administrative expenses. The Company has an agreement with related party through common ownership, Steele Brands LLC, to provide a commission in exchange for obtaining franchisees. The commission incurred by the Company was approximately $
Source: Item 23 — RECEIPTS (FDD pages 66–252)
What This Means (2024 FDD)
According to Crisp & Green's 2024 Franchise Disclosure Document, as of December 31, 2023, the Parent company owed Crisp & Green $6,631,953. The FDD also provides figures for the amounts owed at the end of the prior two years. As of December 31, 2022, the Parent owed $5,622,852, and as of December 31, 2021, the Parent owed $3,532,630.
This debt arises from an agreement where the Parent provides training, marketing, and administrative support to Crisp & Green in exchange for a management fee. In 2023, this management fee amounted to approximately $1,045,500, while in 2022 and 2021, it was $500,000 each year. These fees are included within general and administrative expenses.
Additionally, the Parent's corporate-owned locations paid royalties and marketing fees to Crisp & Green. In 2023, these payments included a 7% sales royalty of $174,463 and a 2% marketing fee totaling $49,847. In 2022, the royalty was $399,214 and the marketing fee was $114,060. In 2021, the royalty was $530,574 and the marketing fee was $151,584. It is important to note that during 2022, two of the corporate-owned locations were sold to franchisees, which likely impacted the royalty and marketing fee amounts paid by the Parent in subsequent years.
For a prospective franchisee, the increasing debt owed by the Parent to Crisp & Green could raise questions about the financial relationship between the two entities. While the arrangement seems to be based on legitimate services and fees, a significant and growing debt balance may warrant further investigation to ensure the financial stability of both the franchisor and its parent company. It would be prudent for potential franchisees to seek clarification from Crisp & Green regarding the nature of this debt, its repayment terms, and its potential impact on the franchise system.