What is the obligation of Gold Star and its stockholders regarding potential losses 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, some of Gold Star's stockholders hold a 100% interest in GSC Properties, LLC, which is a rental real estate limited liability company. Gold Star is the primary beneficiary of this variable interest entity (VIE) because it leases buildings from GSC Properties, LLC.
Because Gold Star and its stockholders guarantee the debt of GSC Properties, LLC, they 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 assets include property and equipment with a net book value of $10,608,765, which serves as collateral for the obligations of GSC Properties, LLC. In 2024, GSC Properties, LLC had revenues of $2,352,460 and expenses of $1,035,017. Prospective franchisees should be aware of this financial relationship and how it could impact the overall financial health of Gold Star.