What was the net cash used by operating activities for Golden Krust Caribbean Restaurant in 2022?
Golden_Krust_Caribbean_Restaurant Franchise · 2024 FDDAnswer from 2024 FDD Document
100 | $ | (5,271,693) | $ | - | $ (5,101,593) | *No par value, 200 shares authorized, 100 shares issued and outstanding at December 31, 2022 and 2021.
GOLDEN KRUST FRANCHISING, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
| CASH FLOWS PROVIDED BY (USED FOR): | Year Ended December 31, 2022 | 2021 |
|---|---|---|
| OPERATING ACTIVITIES: | ||
| Net income (loss) | $ 1,141,393 $ | (659,030) |
| Adjustments to reconcile net income (loss) to net cash and | ||
| restricted cash (used for) provided by operating activities: | ||
| Related party loan forgiveness | - | (567,961) |
| Depreciation and amortization expense | 91,007 | 106,297 |
| Non-cash lease expense | 54,540 | - |
| Bad debt expense (recoveries) | 196,574 | (490,229) |
| Change in allowance for notes receivable | 14,999 | (61,613) |
| Loss on disposal of equipment | 3,400 | 14,800 |
| Changes in certain assets and liabilities: | ||
| Accounts receivable | (477,332) | 343,400 |
| Inventory | 3,715 | (2,414) |
| Prepaid expenses | 35,908 | (40,254) |
| Other noncurrent assets | 31,812 | (456) |
| Accounts payable | 277,304 | (56,591) |
| Accrued expenses | (2,369,929) | 2,087,305 |
| Deferred franchise fees | (95,050) | 85,408 |
| Other current liabilities | (38,144) | 12,604 |
| Deferral of employment tax deposits and payments | (50,438) | (50,433) |
| Employee retention credit | 580,958 | (580,958) |
| Net Cash (Used for) Provided By Operating Activities | (599,283) | 139,875 |
| INVESTING ACTIVITIES: |
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 35)
What This Means (2024 FDD)
According to Golden Krust Caribbean Restaurant's 2024 Franchise Disclosure Document, the net cash used for operating activities in 2022 was a negative $599,283. This indicates that the company's core business operations consumed more cash than they generated during that year. In contrast, the net cash provided by operating activities in 2021 was $139,875, showing a significant shift in cash flow performance.
Several factors contributed to this change in cash flow. These include a net income of $1,141,393 in 2022 compared to a net loss of $659,030 in 2021, adjustments for non-cash items like depreciation and amortization expense ($91,007 in 2022 and $106,297 in 2021), and non-cash lease expenses of $54,540 in 2022. There were also significant changes in assets and liabilities, such as accounts receivable decreasing by $477,332 and accrued expenses decreasing by $2,369,929, which impacted the cash flow from operating activities.
For a prospective franchisee, this information is crucial as it reflects the financial health and operational efficiency of Golden Krust Caribbean Restaurant. A negative cash flow from operations could signal potential challenges in managing day-to-day expenses or indicate a need for improved operational strategies. It is important to investigate the reasons behind this negative cash flow and understand how the company plans to address it. Franchisees should also compare these figures with industry benchmarks to assess the company's performance relative to its peers.
Furthermore, the document indicates that the company had an employee retention credit of $580,958 in 2022. Understanding the sustainability and future availability of such credits is important for assessing the long-term financial outlook. Additionally, the changes in related party transactions, such as the loan forgiveness and balances due between Golden Krust Caribbean Restaurant and its related entities, can provide insights into the company's financial relationships and potential risks.