What was the allowance for credit losses related to royalty receivables for Beggars Pizza in 2022?
Beggars_Pizza Franchise · 2025 FDDAnswer from 2025 FDD Document
sured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash deposits.
Royalty Receivables – Royalty receivables are stated at the net collectible amount reduced by an allowance for credit losses. The Company does not charge interest or late fees on amounts past due. Prior to 2023, the Company estimated the allowance based on its historical experience of the relationship between actual bad debts and contract revenues. As a result of the changes in the Company's credit policy during 2023, the Company changed to estimating the allowance based on an analysis of individual customers adjusted for current conditions and reasonable forecasts, taking into consideration t
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 39)
What This Means (2025 FDD)
According to the 2025 FDD, Beggars Pizza's allowance for credit losses related to royalty receivables was $10,000 as of December 31, 2022. This allowance represents the company's estimate of the amount of royalty receivables that may not be collectible from franchisees.
Beggars Pizza states royalty receivables at the net collectible amount, reducing the balance by the allowance for credit losses. The company does not charge interest or late fees on past due amounts. Prior to 2023, Beggars Pizza estimated the allowance based on historical experience, but in 2023, they changed their method to analyze individual customer accounts, considering factors like the age of past due accounts and the customer's ability to repay.
For a prospective Beggars Pizza franchisee, this information indicates that the franchisor acknowledges the potential for some franchisees to fall behind on royalty payments. The allowance suggests that Beggars Pizza has a process in place to account for these potential losses. It is important to note that the franchisor's accounting practices can impact its financial stability, which in turn could affect the support and services it provides to franchisees.
It would be prudent for a potential franchisee to inquire about the specific criteria Beggars Pizza uses to determine the allowance for credit losses, as well as the company's procedures for managing and collecting overdue royalty payments. Understanding these practices can provide insight into the financial health of the franchise system and the potential risks associated with royalty obligations.