What financial instruments potentially expose the Aw Company to concentration of credit risk?

According to Aw's 2025 Franchise Disclosure Document, the financial instruments that potentially expose the company to a concentration of credit risk primarily consist of cash and cash equivalents. The FDD states that the balances in Aw's cash accounts did not exceed the Federal Deposit Insurance Company's (FDIC) insurance limit of $250,000. Aw maintains its cash and cash equivalents with accredited financial institutions.

For a prospective Aw franchisee, this information indicates that Aw's financial risk related to cash holdings is mitigated by FDIC insurance and the use of accredited financial institutions. This is a common practice to safeguard cash assets. The FDIC insurance covers up to $250,000 per depositor, per insured bank, which means that Aw's cash deposits are protected up to this limit in case of a bank failure.

However, franchisees should be aware that while the risk is mitigated, it is not eliminated. If Aw held cash balances exceeding the FDIC limit at any single institution, the excess amount would be at risk in the event of a bank failure. While the FDD states that the balances in the Company's cash accounts did not exceed the Federal Deposit Insurance Company's (FDIC) insurance limit of $250,000, it is important to note that this statement is as of the time the financial statements were prepared. A prospective franchisee may want to inquire about Aw's current cash management practices and policies to ensure that cash balances remain within insured limits.