How does Beef O Bradys determine the allowance for credit losses related to franchisee receivables?
Beef_O_Bradys Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee receivables consist of receivables due from franchisees for royalty fees and are stated at the amount of consideration from customers of which the Company has an unconditional right to receive.
Franchisee and notes receivable (receivables) are reported net of an allowance for credit losses as determined by management at the end of each reporting period. The Company does not charge interest or require collateral to secure its receivables. An allowance for expected credit losses has been estimated and established based on qualitative and quantitative factors including, the Company's historical collection experience, internally developed forecasts, current and expected economic conditions, and specific allowances for known troubled accounts. The allowance for expected credit losses is determined based on the amount the Company expects to collect over the life of the receivable. During 2024 and 2023, there was minimal activity in the allowance for credit losses as the allowance for credit losses was determined to be trivial.
Source: Item 23 — RECEIPTS. (FDD pages 66–330)
What This Means (2025 FDD)
According to Beef O Bradys's 2025 Franchise Disclosure Document, the company reports franchisee and notes receivable net of an allowance for credit losses. This allowance is determined by Beef O Bradys's management at the end of each reporting period. The receivables consist of royalty fees due from franchisees. Beef O Bradys does not charge interest or require collateral to secure its receivables.
To estimate the allowance for expected credit losses, Beef O Bradys considers both qualitative and quantitative factors. These factors include the company's historical collection experience, internally developed forecasts, current and expected economic conditions, and specific allowances for known troubled accounts. The allowance is based on the amount Beef O Bradys expects to collect over the life of the receivable.
In 2024 and 2023, the activity in the allowance for credit losses was minimal, as the allowance was determined to be trivial. This suggests that Beef O Bradys has generally been successful in collecting its receivables from franchisees. However, this could change in the future if economic conditions worsen or if a significant number of franchisees experience financial difficulties.