How does Aira Fitness determine the allowance for doubtful accounts related to franchisee receivables?
Aira_Fitness Franchise · 2025 FDDAnswer from 2025 FDD Document
[Item 23: **RECEIPTS]
Management determines the allowance for doubtful accounts based on historical losses, current expectations, and economic conditions. On a continuing basis, management analyzes delinquent accounts receivable and, once these accounts receivable are determined to be uncollectible, they are written off through a charge against an existing allowance account. The allowance account is reviewed regularly and adjusted against earnings as appropriate. The Company determined that an allowance on outstanding franchisee receivables of $0 was necessary as of December 31, 2024, December 31, 2023, & December 31, 2022. Franchisee bad debt expense was $0 for the year ended December 31, 2024, December 31, 2023, & December 31, 2022. Franchisee amounts written off were $0 for the year ended December 31, 2024, December 31, 2023, & December 31, 2022.
Source: Item 23 — **RECEIPTS (FDD pages 59–254)
What This Means (2025 FDD)
According to Aira Fitness's 2025 Franchise Disclosure Document, the management determines the allowance for doubtful accounts by considering historical losses, current economic expectations, and prevailing economic conditions. This is a standard accounting practice to estimate potential uncollectible accounts. Aira Fitness analyzes delinquent accounts receivable on a continuing basis.
Once specific accounts receivable are deemed uncollectible, Aira Fitness writes them off by charging against an existing allowance account. This allowance account is regularly reviewed and adjusted against earnings as needed, ensuring the financial statements accurately reflect potential losses. This process helps Aira Fitness maintain a realistic view of its financial health.
Notably, for the years ending December 31, 2024, December 31, 2023, and December 31, 2022, Aira Fitness determined that an allowance on outstanding franchisee receivables of $0 was necessary. Additionally, the franchisee bad debt expense and franchisee amounts written off were also $0 for each of those years. This indicates that, historically, Aira Fitness has not experienced issues with franchisees failing to pay what they owe, which could be a positive sign for prospective franchisees.
However, it is important to note that this could change in the future depending on economic conditions or the financial stability of Aira Fitness franchisees. A prospective franchisee should inquire about the factors that could influence these determinations and how Aira Fitness supports franchisees who may be struggling financially.