What was the depreciation expense for Mr. Sandless for the year ended December 31, 2022?
Mr_Sandless Franchise · 2025 FDDAnswer from 2025 FDD Document
expenses | 1,511,123 | 1,060,753 | | Net Income (Loss) | (90,611) | 63,998 | | Members' (Deficit) - Beginning | (76,192) | (88,149) | | Members' (Distributions) | (36,253) | (52,041) | | Members' (Deficit) - Ending | $ (203,056) | $ (76,192) |
MR. SANDLESS FRANCHISE, LLC STATEMENT OF CASHFLOWS
| YEARS ENDED DECEMBER 31 | |||
|---|---|---|---|
| 2022 | 2021 | ||
| Cash Flows from Operating Activities: | |||
| Net Income | $ (90,611) | $ | 63,998 |
| Depreciation | 13,131 | 14,093 | |
| Adjustments to reconcile net income to net cash | |||
| provided by operating activities: | |||
| Changes in assets and liabilities | |||
| Accounts receivable | 1,581 | 2,094 | |
| Inventory | (11,865) | — | |
| Prepaid expenses | 5,410 | (5,410) | |
| Due from related party | 27,500 | 80,000 | |
| Accounts payable and accrued expenses | (971) | 9 | |
| Due to related party | (13,924) | (33,260) | |
| Deferred revenue | 97,730 27,981 | (81,270) 40,254 | |
| Cash Flows from Investing Activities: | |||
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 41–42)
What This Means (2025 FDD)
According to Mr. Sandless's 2025 Franchise Disclosure Document, the depreciation expense for the year ending December 31, 2022, was $13,131. This figure reflects the reduction in value of Mr. Sandless's assets, such as office equipment, computer equipment, and automobiles, over that year. The company calculates depreciation using the straight-line method over an estimated useful life of five years for these assets.
Depreciation is a non-cash expense that reflects the wear and tear or obsolescence of assets. For a prospective franchisee, understanding depreciation is important because it impacts the company's profitability and tax liabilities. While it doesn't represent an actual cash outflow, it does reduce the company's reported income, which can affect its attractiveness to investors or lenders.
Reviewing depreciation expenses over several years, as presented in the FDD, can give a potential franchisee insight into Mr. Sandless's capital investments and asset management practices. Fluctuations in depreciation expense could indicate changes in the company's investment in equipment or its accounting practices. It is also worth noting that the book value of property and equipment at the end of 2022 was $7,290.