What was the net amount of royalty receivables for Chicken Guy as of December 29, 2024?
Chicken_Guy Franchise · 2025 FDDAnswer from 2025 FDD Document
pproximately 32%, 20%, 16% and 16%, respectively, of total royalty revenues and one customer comprising approximately 73% of total franchise fee revenues for the year ended December 31, 2023.
At December 25, 2022, the Company had four customers comprising 36%, 20%, 19%, and 10%, respectively, of total outstanding royalty receivables, net. The Company also had two customers comprising approximately 52% and 30%, respectively, of total royalty revenues and two customers each comprising approximately 47% of total franchise fee revenues for the year ended December 25, 2022.
Due From/To Related Parties
Amounts due from/to related parties are comprised of non-interest-bearing cash advances between various entities related through common control that are due upon demand.
Royalty Receivables and Allowance for Credit Losses
Royalty receivables represent amounts due from franchisees for sales-based royalties due under normal trade terms. An allowance for credit losses is established to provide for expected credit losses by evaluating factors such as customer creditworthiness, historical payment and loss experiences, current and forecasted economic conditions, and the age and status of outstanding receivables.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 50)
What This Means (2025 FDD)
According to Chicken Guy's 2025 Franchise Disclosure Document, the net royalty receivables as of December 29, 2024, were $127,714. Royalty receivables are amounts due to Chicken Guy from franchisees for sales-based royalties under normal trade terms. These receivables are subject to potential credit losses, which Chicken Guy accounts for with an allowance for credit losses.
The allowance for credit losses represents Chicken Guy's estimate of the amounts that may not be collectible from franchisees. As of December 29, 2024, Chicken Guy recorded an allowance for expected credit losses of $20,366. This allowance is based on factors such as the creditworthiness of franchisees, historical payment and loss experiences, economic conditions, and the age and status of outstanding receivables. Royalty receivables are written off against this allowance when they are deemed uncollectible.
It's important to note that at December 29, 2024, five customers accounted for a significant portion of Chicken Guy's total outstanding royalty receivables, net, with percentages of approximately 32%, 24%, 16%, 14%, and 11%, respectively. This concentration of receivables with a few customers means that Chicken Guy's financial health is somewhat dependent on the ability of these specific franchisees to pay their royalties. A prospective franchisee should consider these factors when assessing the financial stability of Chicken Guy.