Does Buildingstars require collateral to secure accounts receivable from franchisees and customers?
Buildingstars Franchise · 2025 FDDAnswer from 2025 FDD Document
balances in excess of its insured limits. Management has deemed this as a normal business risk.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024, 2023 and 2022
NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Concentration of Credit Risk
The Company generates accounts receivable in the normal course of business. The Company grants credit to franchisees and customers throughout the United States and does not require collateral to secure accounts receivable.
Accounts Receivable
Accounts receivable are carried net of allowance for credit losses. The allowance for credit losses is increased by provisions charged to expense and reduced by accounts charged off, net of recoveries.
Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 34–43)
What This Means (2025 FDD)
According to Buildingstars's 2025 Franchise Disclosure Document, Buildingstars does not require collateral to secure accounts receivable from either franchisees or customers. This policy is part of Buildingstars's broader approach to managing credit risk. Instead of requiring collateral, Buildingstars grants credit to franchisees and customers throughout the United States.
Buildingstars manages potential credit losses by maintaining an allowance for credit losses. This allowance is adjusted based on provisions charged to expense and reductions from accounts charged off, net of any recoveries. The level of the allowance is determined by management's assessment of current economic conditions, changes in the balance's character and size, historical loss experience, and expectations for future losses.
For a prospective Buildingstars franchisee, this means they will not be required to provide collateral to secure their accounts receivable. However, Buildingstars actively manages credit risk through an allowance for credit losses, which is a common accounting practice. Franchisees should be aware that Buildingstars monitors accounts receivable and adjusts its allowance based on various economic and financial factors.