How does Bath Tune Up accrue interest income on financed receivables?
Bath_Tune_Up Franchise · 2025 FDDAnswer from 2025 FDD Document
At the point the Company determines balances are uncollectible, the Company will discontinue recognition of interest income related to financing receivables. Interest income on these notes is accrued using the simple interest method.
Other sales – consists primarily of franchisee interest income, franchisee late fee income and franchise training-related revenues. In the normal course of business the Company offers franchisees promissory notes primarily related to financing initial franchise fees. The Company recorded $110,014 and $108,959 of interest income on these promissory notes in the years ended December 31, 2024 and 2023, respectively, which are presented in this caption on the Statements of Operations.
Notes receivable relates to the Company financing a portion of the initial franchise fees from the sale of franchises. The notes are collateralized by the franchise territory. The notes generally bear interest at rates ranging from 6% to 10%, with maturities generally ranging from two to six years.
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 51–52)
What This Means (2025 FDD)
According to Bath Tune Up's 2025 Franchise Disclosure Document, interest income on notes receivable is accrued using the simple interest method. These notes receivable are typically from franchisees who have financed a portion of their initial franchise fees. Bath Tune Up will discontinue recognizing interest income on financing receivables if they determine that the balances are uncollectible.
In 2024, Bath Tune Up recorded $110,014 of interest income on these promissory notes. In 2023, they recorded $108,959. These amounts are included in "Other sales" on the Statements of Operations, which primarily consists of franchisee interest income, franchisee late fee income, and franchise training-related revenues.
These notes receivable are collateralized by the franchise territory. The interest rates on these notes generally range from 6% to 10%, and the maturities typically range from two to six years. This arrangement allows franchisees to manage their initial investment while providing Bath Tune Up with a recurring income stream from interest.