On what basis does Black Bear Diner determine its allowance for uncollectable accounts?
Black_Bear_Diner Franchise · 2025 FDDAnswer from 2025 FDD Document
Accounts Receivable: 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 the 2025 Black Bear Diner Franchise Disclosure Document, the company determines its allowance for credit losses on accounts receivable based on several factors. These factors include historical losses, the franchised restaurant's obligation, existing economic conditions and economic outlook, and other information available at the balance sheet dates. Black Bear Diner 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. The FDD states that no allowance for credit losses was required at December 25, 2024, and December 27, 2023.
For related-party receivables, which include amounts due from BTH, the company determined that no allowance for uncollectable accounts is required. Black Bear Diner also employs 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.