What action might Carbones Pizzeria take if receivables are not received on time?
Carbones_Pizzeria Franchise · 2025 FDDAnswer from 2025 FDD Document
three months or less to be cash equivalents. There were no cash equivalents at October 31, 2024.
Accounts Receivable and Allowance for Credit Losses
Accounts receivable for royalty fees from franchisees are due on or before the first day of each week for the sales during the preceding week and accounts receivable for advertising fee royalties from franchisees are due on or before Tuesday of each week for the sales during the preceding week. All receivables not received on time receive additional scrutiny from management and may be charged interest at rates up to 12% annually.
Source: Item 22 — CONTRACTS (FDD page 30)
What This Means (2025 FDD)
According to Carbones Pizzeria's 2025 Franchise Disclosure Document, the company has specific procedures for handling late payments from franchisees. Royalty fees are due on or before the first day of each week for the preceding week's sales, while advertising fee royalties are due by Tuesday of each week for the prior week's sales.
If these payments are not received on time, Carbones Pizzeria's management will give the situation additional scrutiny. Furthermore, the company may charge interest on the overdue amounts, potentially at rates of up to 12% annually. This policy is in place to ensure timely payments and to compensate the company for the administrative burden and potential financial impact of late receivables.
In addition to these measures, Carbones Pizzeria also employs an allowance for expected credit losses to account for potential uncollectible amounts. For the year ended October 31, 2023, this allowance amounted to $109,133. This indicates that Carbones Pizzeria proactively manages the risk of non-payment by franchisees, setting aside funds to cover anticipated losses from overdue or uncollectible accounts. Prospective franchisees should be aware of these policies and ensure they can meet the payment deadlines to avoid scrutiny and potential interest charges.