What is management responsible for regarding internal control relevant to the preparation and fair presentation of Chesters' financial statements?

According to Chesters' 2025 Franchise Disclosure Document, management is responsible for the design, implementation, and maintenance of internal controls relevant to the preparation and fair presentation of the company's financial statements. This responsibility ensures that the financial statements are free from material misstatements, whether due to fraud or error. Additionally, management must evaluate whether conditions or events, considered in the aggregate, raise substantial doubt about Chesters' ability to continue as a going concern within one year after the date that the financial statements are available to be issued.

In practical terms, this means Chesters' management must establish and maintain systems and procedures to accurately record and report financial data. These controls help to prevent errors and fraud, ensuring the reliability of the financial information provided to potential investors, franchisees, and other stakeholders. The evaluation of Chesters' ability to continue as a going concern is a critical assessment that impacts the perceived risk and stability of the franchise system.

For a prospective franchisee, this indicates that Chesters' leadership takes responsibility for the accuracy and reliability of its financial reporting. A well-maintained internal control system can provide confidence in the financial health of the company. Franchisees rely on the franchisor's financial stability for ongoing support, brand reputation, and the ability to invest in the franchise system. Therefore, understanding the strength of these internal controls is an important aspect of evaluating the overall franchise opportunity.

It is important to note that while the management is responsible for internal controls, the independent auditors also play a role in assessing the financial statements. The auditors obtain an understanding of internal control relevant to the audits in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Chester's International, LLC's internal control. This collaborative approach aims to provide a comprehensive view of the company's financial position and future prospects.