What was the reported value of Chesters' non-compete agreements in 2023?
Chesters Franchise · 2025 FDDAnswer from 2025 FDD Document
anging from 15 to 20 years. Non-compete agreements are amortized over the term of the agreement 24 months or 36 months.
At December 31, amortization expense consists of the following:
| 2023 | 2021 | |
|---|---|---|
| Copyrights and patents | $ 757,647 | $ 757,647 |
| Non-compete agreements | 1,737,037 | 1,668,471 |
| Less accumulated amortization | (2,464,161) | (2,373,452) |
| $ 30,523 | $ 52,666 |
Amortization expense for years ended December 31, 2023 and 2022 was $
Source: Item 21 — **FINANCIAL STATEMENTS (FDD page 48)
What This Means (2025 FDD)
According to Chesters's 2025 Franchise Disclosure Document, the reported value of non-compete agreements in 2023 was $1,737,037 before accumulated amortization. These agreements are amortized over a period of 24 to 36 months, representing the term of the agreement.
Intangible assets like non-compete agreements are common in franchising. They protect the franchisor's business model and market by preventing franchisees from directly competing with the system after their franchise agreement ends. The value assigned to these agreements reflects their estimated contribution to Chesters's future earnings.
For a prospective Chesters franchisee, this information provides insight into the financial value Chesters places on its non-compete agreements. It also shows how these assets are accounted for, specifically through amortization, which reduces the asset's value over its useful life. Understanding the amortization expense, which was $322,731 in 2023, helps franchisees assess the impact of intangible assets on Chesters's financial statements.
It is important to note that the net value of these agreements is affected by accumulated amortization. As of December 31, 2023, the accumulated amortization against copyrights, patents, and non-compete agreements totaled $2,464,161. This detail is crucial for understanding the overall financial picture of Chesters and the net realizable value of its intangible assets.