What was the provision for bad debt for 1 800 Packouts in 2022?
1_800_Packouts Franchise · 2025 FDDAnswer from 2025 FDD Document
terest expense | | (3,821,499) | | (647,029) | | Earnings from unconsolidated subsidiary | | - | | 77,537 | | Gain on sale of unconsolidated subsidiary | | 1,025,637 | | - | | Other income (expense) | _ | (51,463) | | (112,956) | | Total other expense, net | _ | (2,847,325) | | (682,448) | | Loss before income taxes | | (11,719,346) | | (6,523,717) | | Income tax benefit | _ | 1,280,676 | | 374,421 | | Net loss | $ | (10,438,670) | s | (6,149,296) |
| Balance as of April 9, 2021 (inception) | $ | |
|---|---|---|
| Contributions | 47,557,681 | |
| Net loss | (6,149,296) | |
| Balance as of December 31, 2021 | 41,408,385 | |
| Contributions | 35,555,980 | |
| Distributions | (250,000) | |
| Net loss | _ | (10,438,670) |
| Balance as of December 31, 2022 | Ś | 66,275,695 |
| For the year ded December 31, 2022 | (in | r the period from April 9, 2021 ception) through cember 31, 2021 | ||
|---|---|---|---|---|
| Cash flows from operating activities: | ||||
| Net loss | $ | (10,438,670) | $ | (6,149,296) |
| Adjustments to reconcile net loss to net cash used in | ||||
| operating activities: | ||||
| Amortization of goodwill and intangible assets | 10,568,470 | 2,543,033 | ||
| Depreciation of fixed assets | 29,104 | 5,840 | ||
| Amortization of deferred financing costs | 213,726 | 38,998 | ||
| Amortization of operating lease right-of-use asset | 108,253 | - | ||
| Gain on sale of unconsolidated subsidiary Loss on disposal of fixed assets | (1,025,637) 43,615 | - | ||
| Provision for bad debt | 43,615 25,950 | 32,710 | ||
| Decrease (increase) in: | 23,330 | 32,710 | ||
| Accounts receivable | (777,114) | 34,410 | ||
| Contract assets | (2,540,535) | (169,463) | ||
| Other assets | (535,234) | (216,538) | ||
| Increase (decrease) in: | 2 012 105 | 472.450 | ||
| Accounts payable and accrued expenses Contract liabilities | 2,012,196 3,647,786 | 472,458 768.118 | ||
| Operating lease liabilities | (76,533) | 700,110 | ||
| Deferred taxes | (1,269,181) | (409, 393) | ||
| Net cash used in operating activities | _ | (13,804) | (3,049,123) | |
| • | _ | (13,604) | (3,049,123) | |
| Cash flows from investing activities: | (000 774) | (5.040) | ||
| Purchase of property and equipment | (238,771) | (5,840) | ||
| Contingent consideration paid | ||||
| Proceeds from sale of unconsolidated subsidiary | (1,200,000) 1,623,174 | |||
| Net cash paid for acquisitions | (46,109,861) | (62,103,632) | ||
| Net cash used in investing activities | Ξ | (45,925,458) | (62,109,472) | |
| Cash flows from financing activities: | ||||
| Member contributions | 29,025,980 | 40,065,556 | ||
| Borrowing on long-term debt | 20,100,000 | 28,000,000 | ||
| Payment of debt issuance costs | (307,500) | (932,140) | ||
| Repayment of long-term debt | (378,894) | 2.070.502 | ||
| Borrowing on short-term debt | 3,078,592 | |||
| Repayment of short-term debt | (3,000,000) | |||
| Member distributions | (250,000) | (3,000,000) | ||
| Net cash provided by financing activities | 48,189,586 | 67,212,008 | ||
| Net change |
Source: Item 23 — RECEIPT (FDD pages 67–238)
What This Means (2025 FDD)
According to the 2025 FDD, 1 800 Packouts' provision for bad debt for the year ending December 31, 2022, was $25,950. This figure represents an estimate of the amount of accounts receivable that 1 800 Packouts does not expect to collect. It is an accounting practice to recognize potential losses from uncollectible debts.
For a prospective franchisee, the provision for bad debt indicates the level of risk associated with extending credit to customers. A higher provision suggests a greater likelihood of customers not paying their bills, which can impact the franchisee's cash flow and profitability. Franchisees should consider this factor when evaluating the financial health of 1 800 Packouts and planning their own business operations.
It's important to note that this figure is an estimate and can fluctuate based on various factors, including economic conditions, the creditworthiness of customers, and the effectiveness of collection efforts. Franchisees should monitor their own accounts receivable closely and implement strategies to minimize bad debt, such as thorough credit checks and proactive collection procedures.