What was the long-term portion of Chem Dry's notes receivable at the end of 2023?

According to Chem Dry's 2024 Franchise Disclosure Document, the long-term portion of notes receivable, net of current portion and allowance, was $948,000 at the end of 2023. This figure represents the amount of money owed to Chem Dry from franchisees and other parties that is not expected to be paid within the next 12 months. Notes receivable are amounts due from the sale of franchises and area franchise rights and refinanced obligations, due in monthly payments, with imputed interest from 3.4 to 18.0 percent, collateralized by the franchise, equipment, and personal guarantees. They also include amounts due from the sale of equipment to franchisees, due in monthly payments, with imputed interest between 6.5 and 10.0 percent, collateralized by the equipment.

For a prospective Chem Dry franchisee, understanding the notes receivable can provide insight into the financial health of the franchisor. A high amount of notes receivable could indicate that Chem Dry is actively financing franchisees, which may be a positive sign of growth. However, it also carries the risk of potential defaults. The notes receivable are amounts due from the sale of franchises and area franchise rights and refinanced obligations, due in monthly payments, with imputed interest from 3.4 to 18.0 percent, collateralized by the franchise, equipment, and personal guarantees. They also include amounts due from the sale of equipment to franchisees, due in monthly payments, with imputed interest between 6.5 and 10.0 percent, collateralized by the equipment.

The FDD also indicates that Chem Dry maintains an allowance for credit losses, which was $1,115,000 in 2023. This allowance is an estimate of the amount of notes receivable that Chem Dry does not expect to collect. The long-term portion is calculated by subtracting the allowance for credit losses and the current portion from the total gross notes receivable. The current portion of the notes receivable was $1,027,000 in 2023.

Prospective franchisees should consider the trend of notes receivable over the past three years, as well as the allowance for credit losses, to assess the risk associated with these assets. Comparing these figures to industry benchmarks can also provide a better understanding of Chem Dry's financial performance. Reviewing Note 7 in its entirety will give a franchisee a better understanding of Chem Dry's notes receivable.