What was the allowance for credit losses related to Beggars Pizza's royalty receivables in 2023?
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 Beggars Pizza's 2025 Franchise Disclosure Document, the allowance for credit losses related to royalty receivables was $10,000 as of December 31, 2023. This allowance represents Beggars Pizza's estimate of the amount of royalty receivables that may not be collectible from its franchisees.
In 2023, Beggars Pizza changed its method for estimating this allowance. Previously, the estimate was based on historical experience of bad debts relative to contract revenues. However, due to changes in the company's credit policy during 2023, Beggars Pizza began estimating the allowance based on an analysis of individual customers, considering factors such as the age of past due accounts and the customer's ability to repay. This change suggests a more proactive and individualized approach to assessing credit risk.
For a prospective franchisee, this information indicates that Beggars Pizza actively manages its royalty receivables and accounts for potential losses. The allowance for credit losses reflects the company's efforts to ensure accurate financial reporting by recognizing the risk of non-payment from franchisees. The change in estimation method in 2023 could signal a more refined approach to credit risk management, potentially benefiting both the franchisor and franchisees by promoting financial stability and transparency.