How does Aerus determine the provision for credit loss related to notes receivable from Aerus franchisees?

According to Aerus's 2025 Franchise Disclosure Document, the allowance for credit losses on notes receivable from franchisees is estimated based on several factors. These factors include the company's past experience with franchisees, current economic conditions, and the financial condition of the individual franchisees who have notes receivable.

Aerus determines the provision for credit loss by evaluating the credit risk of each franchisee. This evaluation is based on the franchisee's payment history and their level of business activity. This suggests that franchisees with a strong payment history and a thriving business will be considered lower credit risks, while those with payment issues or struggling businesses will be seen as higher risks.

For a prospective Aerus franchisee, this means that their financial health and payment behavior will directly impact their credit risk assessment if they have notes receivable with Aerus. Maintaining a good payment record and demonstrating a stable or growing business will likely result in more favorable terms and lower provisions for credit losses. Conversely, any financial difficulties or missed payments could lead to stricter terms or a higher allowance for credit losses, increasing the financial burden on the franchisee.