As of December 31, 2023, did Better Blend establish an allowance for doubtful accounts?
Better_Blend Franchise · 2024 FDDAnswer from 2024 FDD Document
Royalties receivable are reported at invoice value. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its franchisees to make required payments. Management considers the age of royalties receivable balances and general economic issues when determining the collectability of specific accounts. Based on management's assessment, the Company provides for estimated uncollectible amounts through a charge to earnings and a credit to the allowance for doubtful accounts. Balances that remain outstanding after reasonable collection efforts are written off through a charge to the allowance for doubtful accounts and credit to royalties receivable. The Company has not established an allowance for doubtful accounts as it is management's opinion that uncollectible accounts, if any, at December 31, 2023 were not material to the financial statements.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 43)
What This Means (2024 FDD)
According to Better Blend's 2024 Franchise Disclosure Document, as of December 31, 2023, Better Blend did not establish an allowance for doubtful accounts. The document states that the company maintains an allowance for doubtful accounts to cover estimated losses from franchisees' inability to make payments.
Better Blend assesses the collectability of specific accounts by considering the age of royalties receivable balances and general economic conditions. The company provides for estimated uncollectible amounts by charging earnings and crediting the allowance for doubtful accounts. Balances that remain outstanding after reasonable collection efforts are written off through a charge to the allowance and a credit to royalties receivable.
However, for the financial year ending December 31, 2023, Better Blend did not find it necessary to establish an allowance for doubtful accounts. Management believed that any uncollectible accounts were not material to the financial statements. This indicates that Better Blend considered the risk of non-payment by franchisees to be low enough that a specific allowance was not required at that time.