What was the decrease to operating lease right-of-use assets due to contract terminations for Chesters in 2024?
Chesters Franchise · 2025 FDDAnswer from 2025 FDD Document
LOWS FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023
| CASH FLOWS FROM OPERATING ACTIVITIES | _ | _ | |
|---|---|---|---|
| Net income | $ (69,699) | $ | 2,582,783 |
| Adjustments to reconcile net income to net cash | |||
| provided by operating activities: | |||
| Loss on disposal of fixed assets | 9,969 | - | |
| Amortization and depreciation | 522,927 | 462,783 | |
| Amortization of operating lease right-of-use assets | 189,709 | 387,265 | |
| Changes in operating assets and liabilities: | (4 = 00 000) | ||
| Accounts receivable | 3,642,762 | (1,563,980) | |
| Other receivables | (421,459) | (400,405) | |
| Due from related parties | (237,110) | (433,495) | |
| Inventories | 1,247,308 | (116,596) | |
| Prepaid expenses and other current assets | (89,469) (1,834,402) | (17,181) | |
| Accounts payable Accrued liabilities | 784,862 | 2,184,712 (79,688) | |
| Customer deposits | (248,670) | 75,943 | |
| Operating lease liabilities | (181,240) | (364,784) | |
| Unearned franchise fees | 54,450 | (88,400) | |
| Other long-term liabilities | 174,238 | (00,400) | |
| Net cash provided by operating activities: | 3,544,176 | 3,029,362 | |
| CASH FLOWS FROM INVESTING ACTIVITIES | |||
| Purchases of equipment | (401,074) | (360,666) | |
| Net cash used in investing activities | (401,074) | (360,666) | |
| CASH FLOWS FROM FINANCING ACTIVITIES | |||
| Repayment of long-term debt | (1,186,667) | (725,090) | |
| Proceeds from long-term debt | 426,111 | - | |
| Distribution to members | (2,743,252) | (1,820,272) | |
| Net cash used in financing activities | (3,503,808) | (2,545,362) | |
| (DECREASE) INCREASE IN CASH | (360,706) | 123,334 | |
| CASH AT BEGINNING OF YEAR | 2,515,674 | 2,392,340 | |
| CASH AT END OF YEAR | $ 2,154,968 | $ | 2,515,674 |
| SUPPLEMENTARY DISCLOSURE OF CASH | |||
| FLOWS INFORMATION: | |||
| Cash paid during the year for interest | $ 181,560 | $ | 139,101 |
| Decrease to operating lease right-of-use assets | _ | ||
| due to contract terminations | $ 391,533 | $ | 846,599 |
| Additions to operating lease right-of-use assets obtained from operating lease liabilities | $ - | $ | 1,930,004 |
| Reduction of operating lease right-of-use assets for tenant improvements | $ - | $ | 180,000 |
| Noncash activity: | |||
| Assets ac |
Source: Item 21 — **FINANCIAL STATEMENTS (FDD page 48)
What This Means (2025 FDD)
According to Chesters's 2025 Franchise Disclosure Document, the decrease to operating lease right-of-use assets due to contract terminations in 2024 was $391,533. In 2023, the decrease to operating lease right-of-use assets due to contract terminations was $846,599.
Operating lease right-of-use assets represent Chesters's right to use an underlying asset (like property for a restaurant location) for the lease term. A decrease in these assets due to contract terminations suggests that Chesters terminated some of its lease agreements during the year. This could be due to various reasons, such as underperforming locations, strategic decisions to exit certain markets, or renegotiation of lease terms.
For a prospective franchisee, this information is relevant because it provides insight into Chesters's management of its lease obligations and potential risks associated with property leases. Franchisees typically enter into their own lease agreements for their restaurant locations, so understanding how Chesters handles its leases can be valuable. A significant decrease in right-of-use assets due to terminations might indicate instability or challenges in maintaining lease agreements, which could indirectly affect franchisees if it reflects broader issues within the franchise system.
It's important to note that this figure only reflects the decrease due to contract terminations and doesn't provide a complete picture of Chesters's overall lease portfolio or strategy. A prospective franchisee should inquire further about the reasons for these terminations and Chesters's approach to managing lease agreements to assess any potential risks or opportunities.