Under what circumstances is an account receivable considered a 'Delinquent Account' for All Team franchisees?
All_Team Franchise · 2025 FDDAnswer from 2025 FDD Document
The balance of any Accounts Receivable remaining unpaid in whole or in part for more than 90 days from the Customer Invoice date and the balance of any Accounts Receivable owing by any Customer who is bankrupt or insolvent or who voluntarily seeks protection under the federal bankruptcy laws or against whom involuntary relief in bankruptcy is sought, or who has filed an assignment for the benefit of creditors prior to the expiration of such 90 day period, or as to whom we have a reasonable basis for believing that such Customer is about to become subject to one of the foregoing conditions or events shall be deemed a "Delinquent Account." The full amount of each Delinquent Account shall be deducted from the Purchase Price or, at our election, be paid by you to us upon demand. Any Delinquent Account that is subsequently collected by us shall be added to the next payment of your Purchase Price (less any other amounts due to us, including without limitation any interest, deductions or offsets permitted hereunder).
Source: Item 10 — FINANCING (FDD pages 17–18)
What This Means (2025 FDD)
According to All Team's 2025 Franchise Disclosure Document, an account receivable is considered a 'Delinquent Account' under specific conditions related to non-payment or the customer's financial status. Specifically, if an account receivable remains unpaid, either in whole or in part, for more than 90 days from the Customer Invoice date, it is classified as a Delinquent Account.
Additionally, an account receivable is deemed delinquent if the customer owing the balance is bankrupt, insolvent, voluntarily seeks protection under federal bankruptcy laws, or faces involuntary bankruptcy relief. This also applies if the customer has filed an assignment for the benefit of creditors before the 90-day period expires. Furthermore, if All Team has a reasonable basis to believe that the customer is about to become subject to any of these adverse financial conditions or events, the account is also classified as a Delinquent Account.
The financial implications for an All Team franchisee are significant. The full amount of each Delinquent Account will be deducted from the Purchase Price that All Team pays to the franchisee for the invoices, or, at All Team's discretion, the franchisee must pay All Team the delinquent amount upon demand. However, if All Team subsequently collects on a Delinquent Account, the collected amount (less any other amounts due to All Team) will be added to the franchisee's next Purchase Price payment. This policy ensures that All Team is protected from losses due to unpaid invoices, but it places the risk of customer non-payment or insolvency squarely on the franchisee.
This arrangement is fairly common in the staffing industry, where franchisees often rely on franchisor financing for payroll. Franchisees should carefully assess the creditworthiness of their customers and proactively manage accounts receivable to minimize the risk of incurring Delinquent Accounts and the associated financial penalties. Understanding these terms is crucial for managing cash flow and maintaining a healthy financial relationship with All Team.