How does Beard Papas estimate credit losses expected over the life of its trade receivables?
Beard_Papas Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company provides an allowance, in the normal course of business, for estimated losses that may result from the inability of the Company's customers to make required payments. The Company maintains an allowance to cover its current expected credit loss arising from the failure of customers to make contractual payments. The Company estimates credit losses expected over the life of its trade receivables based on historical information combined with current conditions that may affect a customer's ability to pay and reasonable and supportable forecasts. Account balances are charged off against the allowance when the Company determines it is probable that the receivable will not be recovered. Collateral is not typically required. The Company generally charges an annual interest rate of 18% on trade receivables after the invoice becomes past due. Unless specific arrangements have been made, accounts receivable over 10 days or 30 days, depending on the types of sales, are considered past due. No allowances for credit losses were recorded as of December 31, 2024 and 2023.
Source: Item 23 — RECEIPTS (FDD pages 58–275)
What This Means (2025 FDD)
According to Beard Papas's 2025 Franchise Disclosure Document, the company maintains an allowance to cover current expected credit losses arising from customers failing to make contractual payments. Beard Papas estimates these credit losses over the life of its trade receivables by considering historical information, current conditions that could affect a customer's ability to pay, and reasonable and supportable forecasts.
When Beard Papas determines that a receivable is unlikely to be recovered, the account balance is charged off against the allowance. Typically, collateral is not required. The company generally charges an annual interest rate of 18% on trade receivables after the invoice becomes past due. Depending on the type of sale, accounts receivable are considered past due if they are over 10 or 30 days old, unless specific arrangements have been made.
It is important to note that no allowances for credit losses were recorded as of December 31, 2024, and 2023. This suggests that, based on their estimations, Beard Papas did not anticipate significant credit losses during these periods. A prospective franchisee should inquire about the specific historical data, current conditions, and forecasting methods Beard Papas uses to estimate credit losses to fully understand the potential financial risks.