What was the non-cash lease expense 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)
Based on the 2024 Franchise Disclosure Document, the financial statements of Golden Krust Caribbean Restaurant do not explicitly state the non-cash lease expense for 2022. However, Note 7 discusses related party transactions, indicating that the company has balances due from related parties, which consist mainly of real estate holdings. These balances include lease payments. Specifically, $913,125 was due to related parties and $77,718 was due from related parties as of December 31, 2022. 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 therefore classified as noncurrent assets and long-term liabilities on the balance sheets. No interest is charged on these liabilities.
Given that the FDD mentions lease payments within related party transactions, it is possible that non-cash lease expenses are embedded within these figures. Non-cash lease expenses typically arise from the recognition of right-of-use assets and lease liabilities under accounting standards, reflecting the economic substance of lease agreements.
A prospective Golden Krust Caribbean Restaurant franchisee should inquire with the franchisor about the specific amount of non-cash lease expenses recognized in 2022 and how these expenses are accounted for in the company's financial statements. Understanding the nature and magnitude of these expenses is crucial for assessing the overall financial health and profitability of the franchise system.