What was the change in Chesters' inventories in 2024?
Chesters Franchise · 2025 FDDAnswer from 2025 FDD Document
L, LLC BALANCE SHEETS DECEMBER 31, 2024 AND 2023**
| 2024 | 2023 | |
|---|---|---|
| ASSETS | ||
| CURRENT ASSETS | ||
| Cash | $ 2,154,968 | $ 2,515,674 |
| Accounts receivable, net | 1,656,584 | 5,299,346 |
| Other receivables | 421,459 | - |
| Due from related parties | 1,354,649 | 1,117,539 |
| Inventories | - | 1,247,308 |
| Prepaid expenses and other current assets | 139,284 | 80,338 |
| Total current assets | 5,726,944 | 10,260,205 |
| PROPERTY AND EQUIPMENT, NET | 1,100,082 | 878,650 |
| OPERATING LEASE RIGHT-OF-USE ASSETS, NET | 1,631,103 | 1,820,812 |
| GOODWILL, NET | 1,290,926 | 1,613,657 |
| TOTAL ASSETS | $ 9,749,055 | $ 14,573,324 |
| LIABILITIES AND MEMBERS' EQUITY | ||
| CURRENT LIABILITIES | ||
| Accounts payable | $ 1,070,100 | $ 2,904,502 |
| Accrued liabilities | 2,070,417 | 1,285,555 |
| Customer deposits | 361,152 | 609,822 |
| Current maturities of long-term debt | 480 |
Source: Item 21 — **FINANCIAL STATEMENTS (FDD page 48)
What This Means (2025 FDD)
According to Chesters's 2025 Franchise Disclosure Document, the company's balance sheets indicate a significant change in inventories between 2023 and 2024. In 2023, Chesters reported inventories valued at $1,247,308. However, by December 31, 2024, the inventory level was reported as zero. This represents a complete depletion of inventories during the 2024 fiscal year.
This change in inventory levels could be due to a variety of factors, such as a change in business strategy, a shift in supply chain management, or a decision to outsource inventory management. For a prospective franchisee, this information is crucial because it reflects how Chesters manages its resources and fulfills orders. Understanding the reasons behind this inventory change is essential for assessing the operational efficiency and potential risks associated with the franchise.
Additionally, the FDD states that in 2023, Chesters had an inventory reserve of $50,140. An inventory reserve is an accounting practice where a company sets aside funds to cover potential losses from obsolete or unsalable inventory. The fact that Chesters had such a reserve in 2023 suggests that they acknowledged the risk of inventory obsolescence. The absence of both inventory and an inventory reserve in 2024 indicates a significant shift in how Chesters manages its inventory risks and assets.
Prospective franchisees should inquire about the reasons for the elimination of inventories and the implications for franchisees. Understanding Chesters's inventory management strategy is vital for making informed decisions about joining the franchise system.