What was the amount of the allowance for credit losses related to accounts receivable for 1-800-GOT-JUNK? as of May 31, 2025?
1_800_Got_Junk Franchise · 2025 FDDAnswer from 2025 FDD Document
- Accounts receivables: Accounts receivables are comprised of receivables from franchisees and receivables from NASA customers where the LLC bills on behalf of the franchisees.
May 31 December 31
Receivables from NASA customers $ 5,128,100 $ 5,746,154 Receivables from franchisees 6,291,580 7,581,074 Allowance for credit losses (106,029) (106,029)
$ 11,313,651 $ 13,221,199
The movements in the allowance for credit losses in respect of accounts receivables during the reporting periods ended May 31, 2025 and December 31, 2024 were as follows:
May 31 December 31
Balance at start of period $ 106,029 $ 690,491 Write off
(81,398) Bad debt recovery
(503,064)
Total $ 106,029 $ 106,029
Source: Item 21 — Financial Statements (FDD page 56)
What This Means (2025 FDD)
According to 1-800-GOT-JUNK?'s 2025 Franchise Disclosure Document, the allowance for credit losses related to accounts receivable as of May 31, 2025, was $106,029. This allowance represents 1-800-GOT-JUNK?'s estimate of potential losses from franchisees and NASA customers who may not pay their outstanding balances.
1-800-GOT-JUNK? records receivables at contractual prices, primarily from ongoing royalties, Sales Centre fees, Ad Fund fees, and NASA customers. To account for potential non-payment, 1-800-GOT-JUNK? maintains an allowance for credit losses (ACL). This allowance is based on historical losses, current market conditions, customer financial health, disputed receivables, the age of outstanding receivables, payment patterns, and economic forecasts.
The company uses an aging schedule to estimate the ACL, categorizing accounts receivable by industry and the number of days past due. The FDD also shows the movements in the allowance for credit losses, with the balance at the start of the period being $106,029, write-offs of $0, and bad debt recovery of $0, resulting in a total allowance of $106,029 as of May 31, 2025. This indicates that 1-800-GOT-JUNK? did not adjust its allowance for credit losses during this period.
For a prospective franchisee, understanding the allowance for credit losses is important because it reflects the credit risk associated with 1-800-GOT-JUNK?'s receivables. While the allowance itself may not directly impact a franchisee's operations, it provides insight into the financial health and risk management practices of the franchisor. A consistent and well-managed allowance suggests that 1-800-GOT-JUNK? is proactive in addressing potential credit losses, which can contribute to the overall stability of the franchise system.