Where does Beauty Bungalows maintain its cash balances?
Beauty_Bungalows Franchise · 2025 FDDAnswer from 2025 FDD Document
ts and the reported revenues and expenses during the reporting period. Actual results could vary from those estimates.
Concentrations of credit risk
Financial instruments that potentially expose the Company to the concentration of credit risk primarily consist of cash and cash equivalents. The Company considers all highly liquid investments with maturities of three months or less to be cash equivalents. The balances in the Company's cash accounts did not exceed the Federal Deposit Insurance Company's insurance limit of $250,000. The Company maintains its cash and equivalents with an accredited financial institution. As of December 31, 2023 and 2022, no balances were uninsured.
Cash and cash equivalents
Cash and cash equivalents include all cash balances on deposit with financial institutions and highly liquid investments with a maturity of three months or less at the date of acquisition.
The Company maintains its cash in bank deposit accounts which could exceed federally insured limits. The Company has not experienced an instance where cash held in the account exceeded insured limits since its inception and has not had losses in such accounts.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 47)
What This Means (2025 FDD)
According to Beauty Bungalows' 2025 Franchise Disclosure Document, the company maintains its cash in bank deposit accounts with an accredited financial institution. These accounts could exceed federally insured limits. However, Beauty Bungalows states that since its inception, it has not experienced any instances where cash held in the account exceeded insured limits, nor has it incurred any losses in such accounts. As of December 31, 2023 and 2022, no balances were uninsured. The company believes it is not exposed to any significant credit risk on cash and cash equivalents.
For a prospective franchisee, this indicates that Beauty Bungalows prioritizes keeping its cash in secure, accredited financial institutions. While the balances could potentially exceed the standard FDIC insurance limit of $250,000, the company reports it has not had any issues with uninsured amounts or losses. This suggests a degree of financial prudence and risk management on the part of the franchisor.
It is important for potential franchisees to independently verify the financial institution's accreditation and insurance coverage. While Beauty Bungalows believes it is not exposed to significant credit risk, economic conditions and bank stability can change. A franchisee may want to inquire about the specific banks used and the company's policies for managing cash balances to ensure they are comfortable with the level of risk.
In the franchise industry, it is common for franchisors to maintain cash balances in reputable financial institutions. However, franchisees should always conduct their own due diligence to assess the financial health and risk management practices of any franchisor they are considering partnering with.