What was the net amount of Beggars Pizza's royalty receivables in 2022, after accounting for credit losses?
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 on royalty receivables was $10,000 as of December 31, 2022. Royalty receivables are accounts receivable that Beggars Pizza has not yet collected from its franchisees. These receivables are stated at the net collectible amount, which means the total amount Beggars Pizza expects to receive after reducing the balance by an allowance for credit losses. The allowance for credit losses is an estimate of the amounts that may not be collectible.
For a prospective franchisee, this indicates that Beggars Pizza acknowledges some risk in collecting royalty payments from franchisees. The allowance for credit losses suggests that Beggars Pizza has factored in potential non-payment when reporting its royalty receivables. This is a standard accounting practice to provide a more realistic view of the company's financial position.
In 2023, Beggars Pizza changed its credit policy and how it estimates the allowance for credit losses. 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 the age of past due accounts and an assessment of the customer's ability to repay.