Under what circumstances might Brain Balance individually evaluate a franchisee's receivable to determine the allowance for expected credit losses?

According to Brain Balance's 2025 Franchise Disclosure Document, the company may individually evaluate a franchisee's receivable to determine the allowance for expected credit losses when it becomes aware of the franchisee's inability to meet its financial obligations. This means that if Brain Balance has reason to believe that a franchisee is struggling financially and may not be able to pay what they owe, Brain Balance will take a closer look at that specific franchisee's account to estimate potential credit losses.

In general, Brain Balance uses a collective approach to determine the allowance for credit losses, considering factors like the aging of receivables, historical collection trends, and economic conditions. However, the individual evaluation allows Brain Balance to address specific situations where a franchisee's financial health is in question. This could arise from missed payments, communication from the franchisee about financial difficulties, or other indicators of financial distress.

For a prospective franchisee, this policy highlights the importance of maintaining a good financial standing with Brain Balance. While Brain Balance typically assesses receivables collectively, individual financial struggles can trigger a more detailed review of a franchisee's account. This individual evaluation could impact the franchisee through stricter payment terms or other actions deemed necessary by Brain Balance to mitigate potential losses. Franchisees should maintain open communication with Brain Balance regarding any financial challenges they may face.