Is the related-party receivable for Black Bear Diner secured or unsecured?
Black_Bear_Diner Franchise · 2025 FDDAnswer from 2025 FDD Document
[Item 23: RECEIPT]
Related-Party Receivable: The related-party receivable is unsecured, interest free and repayable on demand. The related-party receivable at any point in time generally consists of any combination of receivables from royalty and advertising fees, receivables from allocation of shared management and administrative functions for which the Company bills and is reimbursed, gift card receivables from sales of gift cards at BTH owned restaurants for which cash has not yet been remitted to the Company, and from time to time, certain periodic working capital advances that the Company may make to entities under common control (BTH). As of December 25, 2024 and December 27, 2023, allocated administrative services receivable included within the related-party receivable totaled $254,205 and $241,123, respectively. Amounts outstanding at December 25, 2024 and December 27, 2023 were collected in full subsequent to each respective year end.
Source: Item 23 — RECEIPT (FDD pages 56–243)
What This Means (2025 FDD)
According to Black Bear Diner's 2025 Franchise Disclosure Document, the related-party receivable is unsecured. This means that Black Bear Diner's claim to these receivables is not backed by any specific collateral or assets. In the event of a default by the related party, Black Bear Diner would be considered a general creditor, standing in line with other unsecured creditors to recover any outstanding amounts.
The related-party receivable is also interest-free and repayable on demand. This indicates that Black Bear Diner does not charge interest on these receivables and can request repayment at any time. The related-party receivable generally consists of receivables from royalty and advertising fees, receivables from allocation of shared management and administrative functions for which the Company bills and is reimbursed, gift card receivables from sales of gift cards at BTH owned restaurants for which cash has not yet been remitted to the Company, and from time to time, certain periodic working capital advances that the Company may make to entities under common control (BTH).
As of December 25, 2024 and December 27, 2023, allocated administrative services receivable included within the related-party receivable totaled $254,205 and $241,123, respectively. The FDD states that amounts outstanding at December 25, 2024 and December 27, 2023 were collected in full subsequent to each respective year end. For a prospective franchisee, this information provides insight into the financial relationship between Black Bear Diner and its related parties, specifically regarding receivables. The fact that these receivables are unsecured suggests a higher level of risk, as there is no specific collateral to fall back on in case of non-payment, though the FDD states that all amounts were collected in full.