By what method does Bath Tune Up record its inventory?

According to Bath Tune Up's 2025 Franchise Disclosure Document, the company primarily uses supplies and materials to provide and replenish tools and material kits to its franchisees. Bath Tune Up records its inventory at the lower of cost or net realizable value. The company uses the first-in, first-out (FIFO) method for inventory valuation. This means that the first units purchased are assumed to be the first ones sold.

For a prospective franchisee, this means that the cost of goods sold will reflect the cost of the earliest inventory items. In a period of rising prices, FIFO can result in a higher net income because the cost of goods sold will be lower. This can also lead to a higher tax liability. Conversely, if prices are falling, FIFO can result in a lower net income.

Bath Tune Up records its inventory as "Other current assets" on its balance sheets. This indicates that the company expects to use or sell its inventory within one year or the normal operating cycle, which is a standard accounting practice. Understanding the inventory valuation method is important for franchisees as it directly impacts the reported profitability and tax obligations of the business.