What does the auditing firm believe regarding the audit evidence obtained during the Beard Papas audit?

Based on the 2025 Franchise Disclosure Document, the auditing firm believes that the concentration of credit risk for Beard Papas is limited. This assessment is based on the company's routine monitoring and assessment of its customers' financial strength. This suggests that Beard Papas actively manages its financial risks associated with lending credit to its customers.

Specifically, the FDD mentions that one major customer accounted for approximately 26% and 28% of total revenue for the years ended December 31, 2024 and 2023, respectively. This same customer accounted for 23% and 38% of accounts receivable as of December 31, 2024 and 2023, respectively. The fact that a significant portion of revenue and accounts receivable is tied to a single customer indicates a potential concentration of credit risk. However, Beard Papas's proactive monitoring of its customers' financial health appears to mitigate this risk.

For a prospective franchisee, this information indicates that Beard Papas has a strategy in place to manage financial risks associated with its customer base. While reliance on a major customer can be a point of vulnerability, the franchisor's due diligence provides some reassurance. A potential franchisee may want to inquire about the specific procedures Beard Papas uses to monitor the financial strength of its major customers and what contingency plans are in place should a major customer face financial difficulties.