How does Buona manage and report accounts receivable from franchisees?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
December 31, 2023 and consisted of 52 weeks. The 2022 fiscal year began at inception and ended on January 1, 2023.
METHOD OF ACCOUNTING:
The Company maintains its accounting records under the accrual method of accounting in conformity with accounting principles generally accepted in the United States of America.
CASH AND CASH EQUIVALENTS:
The Company considers all short-term, highly-liquid unrestricted investments with original maturities of three months or less when purchased to be cash equivalents.
ACCOUNTS RECEIVABLE:
Accounts receivable consist primarily of fees due principally from franchisees. Accounts receivable are reported at the amount management expects to collect from outstanding balances. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to a valuation allowance for bad debts and a credit to accounts receivable.
Source: Item 22 — CONTRACTS (FDD page 78)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, accounts receivable primarily consist of fees due from franchisees. Buona reports these receivables at the amount that management expects to collect from outstanding balances. This indicates that Buona takes a proactive approach in assessing the collectibility of its receivables.
Buona uses reasonable collection efforts for outstanding balances. If these efforts are unsuccessful, the balances are written off through a charge to a valuation allowance for credit losses and a credit to accounts receivable. The FDD states that there were no credit losses for the fiscal years ended December 29, 2024, or December 31, 2023. This suggests that Buona has been effective in collecting its receivables from franchisees.
Buona closely monitors accounts receivable balances and estimates the allowance for credit losses based on historical collection experience and other factors, including current market conditions. The FDD notes that the allowance for accounts receivable has not been material, implying that the risk of significant losses from uncollectible accounts is low. This is a positive sign for prospective franchisees, as it indicates financial stability and effective management of franchisee accounts by Buona.