Was an allowance for uncollectable accounts required at December 27, 2023 for Black Bear Diner?
Black_Bear_Diner Franchise · 2025 FDDAnswer from 2025 FDD Document
Accounts receivable are comprised principally of amounts due to the Company from franchised restaurants. The Company carries its receivables at their face amounts less an allowance for credit losses, which is based on historical losses, the franchised rest obligation, existing economic conditions and economic outlook, and other information available at the balance sheet dates. The Company monitors its accounts receivable and charges to expense an amount equal to its estimate of potential credit losses. Accounts receivable balances are charged off against the allowance when it is determined that the receivable will not be recovered. No allowance for credit losses was required at December 25, 2024 and December 27, 2023.
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Credit Losses: The Company uses of a forward-looking approach to estimate expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments including accounts receivable.
Related-party Receivable: Related-party receivable includes amounts due to the Company from BTH (see Note 9 – Related-Party Transactions). The Company determined that no allowance for uncollectable accounts is required for the related-party receivable.
Source: Item 23 — RECEIPT (FDD pages 56–243)
What This Means (2025 FDD)
According to Black Bear Diner's 2025 Franchise Disclosure Document, the company did not require an allowance for credit losses as of December 27, 2023. The FDD specifies that the company carries its receivables at face value, subtracting any allowance for credit losses. This allowance is determined based on factors such as historical losses, franchisee obligations, economic conditions, and available economic outlooks.
Black Bear Diner monitors its accounts receivable and adjusts expenses to account for potential credit losses, writing off balances when recovery is deemed impossible. The document explicitly states that no allowance for credit losses was necessary on December 27, 2023.
Additionally, the FDD notes that the company determined that no allowance for uncollectable accounts was required for the related-party receivable. This indicates that Black Bear Diner considered the amounts due from related parties, such as BTH, to be fully collectible as of that date.