How often does Bombs Away review and adjust the allowance account for doubtful franchisee receivables?
Bombs_Away Franchise · 2024 FDDAnswer from 2024 FDD Document
after invoicing. The Company reports these receivables at net realizable value.
Management determines the allowance for doubtful accounts based on historical losses, current expectations, and economic conditions. On a continuing basis, management analyzes delinquent accounts receivable and, once these accounts receivable are determined to be uncollectible, they are written off through a charge against an existing allowance account. The allowance account is reviewed regularly and adjusted against earnings as appropriate. The Company determined that an allowance on outstanding franchisee receivables of $0 was necessary as of December 31, 2023. Franchisee bad debt expense was $0 for the year ended December 31, 20
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 35)
What This Means (2024 FDD)
According to Bombs Away's 2024 Franchise Disclosure Document, the company reviews its allowance account for doubtful franchisee receivables regularly and adjusts it against earnings as deemed appropriate. This allowance account is used to account for potential losses from franchisees who may not be able to pay what they owe to Bombs Away. As of December 31, 2023, Bombs Away determined that an allowance on outstanding franchisee receivables of $0 was necessary.
This means that Bombs Away's management analyzes delinquent accounts receivable on a continuing basis. When these receivables are deemed uncollectible, they are written off against the existing allowance account. The fact that the allowance account is reviewed regularly suggests that Bombs Away is actively monitoring the financial health of its franchisees and taking steps to mitigate potential losses.
For a prospective Bombs Away franchisee, this indicates that the franchisor is diligent in managing its financial risks related to franchisee payments. The FDD states that franchisee bad debt expense was $0 for the year ended December 31, 2023, and franchisee amounts written off were also $0 for the same period. This could provide some reassurance that Bombs Away has not had issues with franchisees not paying their dues.