What was the increase (decrease) in due to related parties for Golden Krust Caribbean Restaurant in 2022?
Golden_Krust_Caribbean_Restaurant Franchise · 2024 FDDAnswer from 2024 FDD Document
At December 31, 2022 and 2021 there were amounts due between the two companies of $4,657,186 and $3,691,201, respectively. Interest on these balances, charged to interest expense in the statements of operations totaled $44,614 and $40,375 for 2022 and 2021, respectively.
The Company also has balances due from (to) related parties, through common ownership/management. These related parties consist mainly of real estate holdings that are not consolidated in these financial statements. A total of $913,125 and $274,191 are due to, and $77,718 and $78,040 are due from these related parties as of December 31, 2022 and 2021, respectively. These amounts primarily consist of interest-bearing advances for working capital, lease pay
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 35)
What This Means (2024 FDD)
According to Golden Krust Caribbean Restaurant's 2024 Franchise Disclosure Document, the company had balances due from/to related parties through common ownership/management. These related parties primarily consist of real estate holdings not consolidated in the financial statements. As of December 31, 2022, $913,125 was due to related parties, while $77,718 was due from them. In the previous year, as of December 31, 2021, $274,191 was due to related parties, and $78,040 was due from them.
In 2022, the amount due to related parties increased by $638,934 ($913,125 - $274,191), while the amount due from related parties decreased by $322 ($77,718 - $78,040). The net increase in the balance due to related parties is the sum of these changes, which amounts to $638,612. These amounts primarily consist of interest-bearing advances for working capital, lease payments, and allocation of operating expenses.
Since there are no scheduled repayment requirements, the receivable and payable balances are classified as noncurrent assets and long-term liabilities on the balance sheets. No interest is charged on these liabilities. This arrangement could impact Golden Krust Caribbean Restaurant franchisees indirectly, as the financial health of the franchisor can affect the support and services they receive. Prospective franchisees should inquire about the nature of these related party transactions and their potential impact on the franchise system.