What were the total current liabilities for Stretch Zone in the earlier year presented in the table?
Stretch_Zone Franchise · 2025 FDDAnswer from 2025 FDD Document
Beach, Florida
April 29, 2024
Balance Sheets
| December 31, | |||
|---|---|---|---|
| 2023 | 2022 | ||
| ASSETS | |||
| Current assets: | |||
| Cash | $ 3,083,795 | $ 6,160,442 | |
| Accounts receivable | 883,442 | 639,602 | |
| Furniture inventory | 25,040 | 51,091 | |
| Due from related parties | 10,558 | 48,182 | |
| Contract asset | 6,475 | 3,700 | |
| Celebrity endorsement and marketing, net | 131,056 | 106,650 | |
| Prepaid expenses | 72,397 | 55,276 | |
| Total current assets | 4,212,763 | 7,064,943 | |
| Property and equipment, net | 27,989 | 34,966 | |
| Celebrity endorsement and marketing, net, long-term | 476,783 | 213,300 | |
| Contract asset, long-term | 48,408 | 29,600 | |
| Operating lease, right of use assets | 620,498 | 780,911 | |
| Security deposits | 36,155 | 36,155 | |
| Total assets | $ 5,422,596 | $ 8,159,875 | |
| LIABILITIES AND MEMBER'S DEFICIT | |||
| Current liabilities: | |||
| Accounts payable | $ 669,263 | $ 401,780 | |
| Accrued expenses | 75,203 | 9,424 | |
| Term note, current | 1,710,305 | - | |
| Deferred revenue, current | 1,360,541 | 1,395,170 | |
| Due to related party | 413 | 11,021 | |
| Operating lease liabilities, current | 182,981 | 161,310 | |
| UAR liability | - | 17,897,523 | |
| Total current liabilities | 3,998,706 | 19,876,228 | |
| Term note - long-term, net of debt issuance costs | 37,463,521 | - | |
| Operating lease liabilities, long-term | 504,830 | 687,811 | |
| Deferred revenue, long-term | 15,166,441 | 11,438,985 | |
| Total liabilities | 57,133,498 | 32,003,024 | |
| Commitments and contingencies (see Note I) | |||
| MEMBER'S DEFICIT |
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 total current liabilities for the company as of December 31, 2022, were $19,876,228. This figure represents the sum of several short-term financial obligations, including accounts payable ($401,780), accrued expenses ($9,424), deferred revenue ($1,395,170), amounts due to related parties ($11,021), operating lease liabilities ($161,310), and UAR liability ($17,897,523).
For a prospective Stretch Zone franchisee, understanding the company's liabilities is crucial as it provides insight into the financial stability and operational efficiency of the franchisor. High current liabilities relative to current assets could indicate potential liquidity issues, which might affect the franchisor's ability to support its franchisees. In this case, the current liabilities are significantly higher than the current assets for 2022, which could be a point of concern.
It is important to note that the UAR liability, which stands for Unit Appreciation Rights liability, makes up a substantial portion of the current liabilities in 2022. This liability relates to obligations triggered by changes in the company's ownership. Franchisees should inquire about the nature of these rights and how they might impact the franchisor's financial strategy and support for franchisees going forward. Understanding the context behind these liabilities can provide a clearer picture of the franchisor's financial health and its potential impact on the franchise system.
Therefore, a potential franchisee should carefully evaluate these figures, compare them to industry benchmarks, and seek clarification from Stretch Zone regarding the nature and implications of these liabilities. This due diligence will help in making an informed decision about investing in a Stretch Zone franchise.