What do accounts receivable represent on the balance sheet for Bens Soft Pretzels?
Bens_Soft_Pretzels Franchise · 2025 FDDAnswer from 2025 FDD Document
ted highly liquid investments with an initial maturity of three months or less to be cash equivalents.
Accounts receivable
The Company's accounts receivable consists primarily of amounts due from franchisees for royalties, ad fund fees, and gift card sales. Management periodically reviews the accounts receivables aging and records an allowance for credit losses for any accounts that are expected to be uncollectible based on current economic conditions, history with the franchise owner, and overall performance of its bakeries. Once all attempts to collect have been exhausted, Management writes the balance off against the allowance. As of December 31, 2024, 2023, and 2022, the balance of the allowance for credit losses was $20,000, $0, and $0, respectively. For the years ended Decemb
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 46)
What This Means (2025 FDD)
According to Ben's Soft Pretzels' 2025 Franchise Disclosure Document, accounts receivable on the balance sheet primarily represent amounts due from franchisees. These amounts consist of royalties, advertising fund fees, and gift card sales that Ben's Soft Pretzels has earned but not yet received. The company has an unconditional right to these funds once they have satisfied their performance obligations. These receivables are classified as current assets on the balance sheet.
Ben's Soft Pretzels manages the risk of non-payment by periodically reviewing the accounts receivable aging. They establish an allowance for credit losses for accounts deemed potentially uncollectible, based on factors like current economic conditions, the franchisee's payment history, and the overall performance of their bakery. When all collection attempts have been exhausted, the uncollectible balance is written off against this allowance.
For prospective franchisees, this means that Ben's Soft Pretzels closely monitors payments and has a system in place to account for potential losses. The FDD states that as of December 31, 2024, the allowance for credit losses was $20,000, while it was $0 in both 2023 and 2022. The credit loss expense related to accounts receivable totaled $28,204 in 2024, $2,957 in 2023, and $892 in 2022. This indicates that Ben's Soft Pretzels experienced higher uncollectible amounts in 2024 compared to previous years. Franchisees should maintain timely payments to avoid contributing to these credit losses and to maintain a good financial standing with the franchisor.