Under what conditions does Annex Brands write off accounts receivable?

According to Annex Brands' 2025 Franchise Disclosure Document, the company writes off accounts receivable once all standard collection procedures have been unsuccessful and management determines that the receivable is uncollectible. Accounts receivable primarily consists of continuing franchise fees. These receivables are stated at the amount Annex Brands expects to collect but are unsecured, which means the company bears the risk if these amounts become uncollectible.

Annex Brands considers accounts receivable past due when payments are not received within 30 days of the due date. To account for potential losses, the company maintains an allowance for doubtful accounts. This allowance is management's estimate of potential losses on specific accounts and non-specific accounts included in accounts receivable. Management's estimate relies on the credit risk of specific franchisees, historical trends, and other relevant information.

For a prospective franchisee, this policy highlights the importance of understanding the creditworthiness of fellow franchisees and the overall financial health of the Annex Brands system. It also indicates that Annex Brands actively manages its receivables and has a process for dealing with uncollectible accounts, which can provide some assurance about the company's financial management practices.