How does Black Bear Diner estimate credit losses on accounts receivable from franchised restaurants?
Black_Bear_Diner Franchise · 2025 FDDAnswer from 2025 FDD Document
unearned are deferred and are included as a component of other accrued liabilities in the balance sheets until the related expenses are charged to operations.
Cash and Cash Equivalents: The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.
Restricted Cash: As further discussed in Note 4 - Franchising and above, the Company receives cash from franchisees under the marketing fund program. All su accounts and classified as restricted cash on the balance sheet. At December 25, 2024 and December 27, 2023, the Company had $210,320 and $595,018 of cash restricted under its marketing fund.
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.
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 estimates credit losses on accounts receivable from franchised restaurants using a forward-looking approach based on expected losses, rather than incurred losses. This approach is used to estimate credit losses on certain financial instruments, including accounts receivable. This method may result in earlier recognition of allowances for losses.
Black Bear Diner carries its receivables at their face amounts, subtracting an allowance for uncollectable accounts. This allowance is determined based on historical losses, the franchised restaurant's current ability to pay, existing economic conditions and outlook, and other available information at the balance sheet dates. The company actively monitors its accounts receivable and charges an expense equal to its estimate of potential credit losses.
When it is determined that a receivable will not be recovered, the accounts receivable balances are charged off against the allowance. Notably, the FDD states that no allowance for uncollectable accounts was required as of December 27, 2023, and December 28, 2022, or as of December 25, 2024. This suggests that Black Bear Diner has not experienced significant issues with collecting receivables from its franchisees in recent years.