In the context of Crowne Plaza's financial statements, what is a potential consequence of using estimates and assumptions?
Crowne_Plaza Franchise · 2025 FDDAnswer from 2025 FDD Document
The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported year. Actual results could differ from those estimates.
Source: Item 23 — Receipts (FDD pages 100–424)
What This Means (2025 FDD)
According to Crowne Plaza's 2025 Franchise Disclosure Document, the preparation of financial statements requires management to make estimates and assumptions. These estimates and assumptions impact the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. A key consequence for prospective Crowne Plaza franchisees is that the actual financial results could differ from these initial estimates.
This disclaimer means that the financial picture presented in the FDD, while prepared according to generally accepted accounting principles, is not a guarantee of future performance. Various factors can cause actual results to deviate from the estimated figures. These factors can include market conditions, economic changes, and unforeseen expenses.
For a potential franchisee, this highlights the importance of conducting thorough due diligence. It is crucial to not only review the financial statements but also to understand the assumptions that underpin them. Speaking with existing franchisees, consulting with a financial advisor, and conducting independent market research can help a prospective franchisee assess the reasonableness of the estimates and the potential risks involved. Understanding the sensitivity of these estimates is vital for making an informed investment decision regarding a Crowne Plaza franchise.