Why is Gold Star considered the primary beneficiary of GSC Properties, LLC?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
aggregate debit balance of $308,433 remaining at December 31, 2024 in accumulated other comprehensive income. All forecasted transactions currently being hedged are expected to occur in July 2028.
NOTE 21 – VARIABLE INTEREST ENTITY
U.S. GAAP addresses the consolidation of business enterprises to which the usual condition of consolidation, ownership of a majority interest, does not apply. U.S. GAAP focuses on controlling financial interests that may be achieved through arrangements that do not involve voting interests. They conclude that, in the absence of clear control through voting interests, a company's exposure (variable interest) to the economic risks and potential rewards from the assets and activities of the variable interest entities (VIE's) is the best evidence of control. If an enterprise holds a majority of the variable interests of an entity, it would be considered the primary beneficiary.
Some of the Company's stockholders hold a 100% interest in GSC Properties, LLC, a rental real estate limited liability
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, Gold Star is considered the primary beneficiary of GSC Properties, LLC because it leases buildings from GSC Properties, LLC, which is a rental real estate limited liability company (LLC) owned entirely by some of Gold Star's stockholders. Gold Star and its stockholders guarantee the debt of GSC Properties, LLC. Because of this relationship and guarantee, Gold Star must absorb any potential losses of GSC Properties, LLC.
This arrangement gives Gold Star a controlling financial interest in GSC Properties, LLC, which necessitates the consolidation of their financial statements. As of December 31, 2024, GSC Properties, LLC had assets of $13,748,932 and liabilities of $6,273,336. The company also generated revenues of $2,352,460 and incurred expenses of $1,035,017 during that year. A significant portion of GSC Properties, LLC's assets consists of property and equipment, which had a net book value of $10,608,765 as of December 31, 2024, and serves as collateral for the company's obligations.
For a prospective franchisee, this information indicates that Gold Star's financial performance is closely tied to that of GSC Properties, LLC. The franchisee should be aware that the financial stability of GSC Properties, LLC could potentially impact Gold Star's overall financial health. Understanding the relationship between Gold Star and its related entities like GSC Properties, LLC is crucial for assessing the overall risk and stability of the franchise opportunity. Franchisees should seek clarification from Gold Star regarding the nature and extent of these relationships and their potential impact on the franchise's operations and financial performance.