Does Afuri Ramen Dumpling have the right to apply payments from the franchisee to past due debts?

The 2024 Afuri Ramen Dumpling Franchise Disclosure Document addresses accounts receivable from franchisees. According to the FDD, these accounts receivable are generally unsecured. This means Afuri Ramen Dumpling does not have a specific asset, like equipment or property, that they can claim if a franchisee fails to pay what they owe.

To manage the risk of non-payment, Afuri Ramen Dumpling charges a 5% late fee and 1.5% interest per month on unpaid balances. It is important to note that while these fees are charged, the company did not recognize any revenue related to these charges for the year ended December 31, 2023. This could be due to the company not expecting to receive the money, or some other accounting reason.

Afuri Ramen Dumpling establishes an allowance for doubtful accounts based on their experience and analysis of specific franchisees. This involves considering the age of past-due accounts and assessing the franchisee's ability to pay. As of December 31, 2023, management considered all accounts receivable to be collectible, so no allowance for doubtful accounts had been established, and there was no bad debt expense. This suggests that, at that time, Afuri Ramen Dumpling believed all franchisees would eventually pay their debts.