What was the total net loss for Extreme Art Studio as of December 31, 2023?
Extreme_Art_Studio Franchise · 2024 FDDAnswer from 2024 FDD Document
ENT OF MEMBER'S EQUITY For the Year Ended December 31, 2023
| Balance at July 20, 2023 (Inception) | $ - |
|---|---|
| Member contributions | 22,622 |
| Net loss | (7,621) |
| Balance at December 31, 2023 | $ 15,001 |
STATEMENT OF CASH FLOWS For the Year Ended December 31, 2023
| Cash flows from operating activities: Net loss | $ (7,621) | |---------------------------------------------------|---------------| | Net cash used by operating activities | (7,621) | | Cash flows from financing activities | | | Member contributions | 22,622 | | Net cash provided by financing activities | 22,622 | | Net change in cash and cash equivalents | 15,001 | | Cash and cash equivalents at beginning of period | | | Cash and cash equivalents at end of period | $ 15,001 | | Supplemental disclosures of cash flow | | | Cash paid for interest and taxes | $ - |
NOTES TO THE FINANCIAL STATEMENTS December 31, 2023
(1) Nature of Business and Summary of Significant Accounting Policies
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 49)
What This Means (2024 FDD)
According to Extreme Art Studio's 2024 Franchise Disclosure Document, the company experienced a net loss of $7,621 as of December 31, 2023. This figure is reflected in both the statement of member's equity and the statement of cash flows. The statement of member's equity shows the net loss impacting the balance at December 31, 2023, while the statement of cash flows indicates the net loss as part of the cash flows from operating activities.
For a prospective franchisee, this net loss indicates that Extreme Art Studio's franchising operations were not profitable during the period from its formation on July 20, 2023, to the end of the year. This could be due to initial setup costs and investments made during the early stages of the business. It's important to note that the company was newly formed during this period, which may explain the initial losses.
It is typical for new franchise systems to show initial losses as they invest in infrastructure and build their brand. However, a potential franchisee should investigate further to understand the reasons behind the loss and the franchisor's plans to achieve profitability. Understanding the expenses that contributed to the net loss, such as professional fees of $7,621, can provide additional insight.
Prospective franchisees should also consider the member contributions of $22,622, which helped offset the net loss and maintain a positive member's equity balance of $15,001 as of December 31, 2023. This suggests that the company has financial backing from its members, which can provide stability during the initial phases of the franchise.