What was the net cash provided by operating activities for Stretch Zone in 2022?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
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Statements of Cash Flows
| Year Ended | |
|---|---|
| December 31, |
| 2023 | 2022 | |
|---|---|---|
| Cash flows from operating activities: | ||
| Net loss | $ (13,663,363) | $ (16,997,533) |
| Reconciliation of net loss to net cash provided by | ||
| operating activities: | ||
| Depreciation expense | 6,977 | 6,531 |
| Bad debt expense | - | 8,351 |
| Amortization of celebrity endorsement | 97,297 | 106,650 |
| Amortization of contract asset | 6,167 | 3,700 |
| Amortization of debt issuance costs | 146,390 | - |
| Change in operating lease right-of use asset | 160,413 | 158,817 |
| UAR liability | 12,466,993 | 17,897,523 |
| (Increase) decrease in: | ||
| Accounts receivable | (243,840) | (494,155) |
| Contract asset | (27,750) | (37,000) |
| Due from/to related party, net | 27,016 | (24,089) |
| Furniture inventory | 26,051 | (51,091) |
| Prepaid expenses | (17,121) | 22,724 |
| Increase (decrease) in: | ||
| Accounts payable | 267,483 | (629) |
| Accrued expenses | 65,779 | 537 |
| Deferred revenue | 3,692,827 | 5,017,476 |
| Operating lease liability | (161,310) | (135,227) |
| Net cash provided by operating activities | 2,850,009 | 5,482,585 |
| Cash flows from investing activities: | ||
| Property and equipment purchases | - | (32,380) |
| Net cash used in investing activities | - | (32,380) |
| Cash flows from financing activities: | ||
| Debt issuance costs | (972,564) | - |
| Proceeds from term note | 40,000,000 | - |
| Contribution from member | 1,059,487 | - |
| Distributions to member and former member | (46,013,579) | (2,520,000) |
| Net cash used in financing activities | (5,926,656) | (2,520,000) |
| Net change in cash | (3,076,647) | 2,930,205 |
| Cash, beginning of year | 6,160,442 | 3,230,237 |
| Cash, end of year | $ 3,083,795 | $ 6,160,442 |
| Supplementary disclosure of cash flow information: | ||
| Cash paid for interest | $ 3,428,028 | $ - |
| Non-cash transactions: | ||
| Celebrity endorsement issued for Class |
Source: Item 3 — Franchisee/Debtor's Warranties. (FDD pages 263–364)
What This Means (2025 FDD)
According to Stretch Zone's 2025 Franchise Disclosure Document, the net cash provided by operating activities in 2022 was $5,482,585. This indicates the amount of cash Stretch Zone generated from its core business operations during that year.
For a prospective franchisee, understanding the net cash provided by operating activities is crucial as it reflects the financial health and stability of the franchisor. A positive cash flow from operations suggests that the company is capable of covering its immediate expenses and has the potential for growth and investment. This figure can be used to assess the overall efficiency and profitability of Stretch Zone's business model.
However, it's important to consider this figure in conjunction with other financial metrics and trends. For instance, the FDD also shows that the net loss for 2022 was $(16,997,533), indicating that while operations generated cash, the company still experienced an overall loss. This discrepancy might be due to non-cash expenses like depreciation or significant one-time expenses. Prospective franchisees should investigate the reasons behind the net loss and how it might impact the franchisor's ability to support its franchisees.
Furthermore, the net cash from operating activities decreased from $5,482,585 in 2022 to $2,850,009 in 2023. This decline could signal potential challenges or changes in the business environment. A potential franchisee should inquire about the reasons for this decrease and what measures Stretch Zone is taking to address it. Understanding these factors will help a franchisee make an informed decision about investing in a Stretch Zone franchise.