Does Gold Star use derivatives for speculation, according to the FDD?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
60,341 | $ | 157,959 | | | Rents Collected | $ | _ | $ | 41,200 | $ | 43,416 | |
The Company also has advances to and from related parties at December 31, 2024, 2023 and 2022. The advances are non-interesting bearing and have occurred within the normal course of business. There are no set repayment terms for the advances. All are eliminated upon consolidation.
NOTE 20 - HEDGING ACTIVITIES
The Company holds derivative financial instruments for the purpose of hedging the risks of certain identifiable and anticipated transactions. In general, the types of risks hedged are those relating to the changes in interest rates. In hedgi
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, the company uses derivatives strictly for hedging risks, not for speculative purposes. This means Gold Star enters into these financial arrangements to mitigate potential losses from market fluctuations, rather than to profit from them.
The FDD specifies that Gold Star aims for its hedging relationships to offset changes in the fair values or cash flows of the items being hedged with corresponding changes in the values of the derivatives. This indicates a conservative approach to financial risk management, which can be reassuring for prospective franchisees.
The document also notes that hedging relationships existed at the end of 2024, 2023, and 2022, and the income statement effect has been recorded in the consolidated financial statements. Additionally, the company incurred interest expenses of $262,505 in 2024, $262,154 in 2023, and $84,816 in 2022 related to cash flow. This provides transparency regarding the company's use of derivatives and their impact on the financial statements. For a franchisee, this suggests that Gold Star manages its financial risks in a way that aligns with standard accounting practices.