What financial instruments potentially subject Beard Papas to concentration of credit risk?
Beard_Papas Franchise · 2025 FDDAnswer from 2025 FDD Document
t the financial statements were available to be issued. Management has determined that there are no subsequent events required to be recorded or disclosed.
3. Concentrations of Risks
Credit Risk
Financial instruments which potentially subject the Company to concentration of credit risk are primarily cash and cash equivalents, and accounts receivable. The Company places its cash and cash equivalents in accounts with three financial institutions that are participating members of the U.S. Federal Deposit Insurance Corporation ("FDIC"). During the years ended December 31, 2024 and 2023, the Company's cash and cash equivalent balances exceeded the FDIC limit from time to time. The Company's cash and cash equivalents balances as of December 31, 2024, with FDIC member institutions exceeded the total amounts insured by FDIC's general deposit insurance rules by approximately $1,119,000. The Company's cash and cash equivalents balances as of December 31, 2023 exceeded the total amounts insured by FDIC's general deposit insurance rules by approximately $945,000.
Major Customers
One major customer accounted for appropriately 26% and 28% of total revenue for the years ended December 31, 2024 and 2023, respectively. This customer accounted for 23% and 38% of accounts receivable as of December 31, 2024 and 2023, respectively.
Source: Item 23 — RECEIPTS (FDD pages 58–275)
What This Means (2025 FDD)
According to Beard Papas's 2025 Franchise Disclosure Document, the financial instruments that potentially subject the company to a concentration of credit risk are primarily cash and cash equivalents, and accounts receivable. The company mitigates some of this risk by placing its cash and cash equivalents in accounts with three financial institutions that are members of the FDIC.
However, Beard Papas's cash and cash equivalent balances have, at times, exceeded the FDIC insurance limit. Specifically, as of December 31, 2024, the company's cash and cash equivalents balances with FDIC member institutions exceeded the insured amounts by approximately $1,119,000. As of December 31, 2023, this exceedance was approximately $945,000. This means that a portion of Beard Papas's cash holdings could be at risk if one of these financial institutions were to fail, as the FDIC insurance would not cover the entire balance.
Additionally, Beard Papas faces concentration of credit risk due to a major customer accounting for a significant portion of total revenue and accounts receivable. For the years ended December 31, 2024 and 2023, one major customer accounted for approximately 26% and 28% of total revenue, respectively. This customer also accounted for 23% and 38% of accounts receivable as of December 31, 2024 and 2023, respectively. While Beard Papas monitors the financial strength of its customers, the reliance on a single major customer could pose a risk if that customer were to experience financial difficulties.