In the Churchs Chicken FDD, where are the restricted cash accounts presented on the consolidated balance sheets?
Churchs_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
(continued)
3. Summary of Significant Accounting Policies (continued)
Restricted Cash
Certain cash accounts are required to be maintained by the 2021 Securitization (described in Note 8, Long-term debt), its indenture, and other related agreements. These cash accounts may be used only for the purposes specified in the 2021 Securitization Agreements. The Company has presented these cash accounts as Restricted cash in the current asset section on the consolidated balance sheets based upon the expected date of cash distribution.
Accounts Receivable, Net
Accounts receivable, net consists primarily of amounts due from franchisees related to royalties, rents, and various miscellaneous items and are generally due within 14 days following each week's sales pursuant to franchise agreements. Receivables that exceed the payment terms extended by the Company are considered delinquent. The allowance for doubtful accounts is calculated based on historical experience, management's judgement regarding the Company's ability to collect, as well as the age of the accounts receivable, current market conditions and reasonable forecasts.
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND TRAINING (FDD pages 35–43)
What This Means (2025 FDD)
According to the 2025 Churchs Chicken Franchise Disclosure Document, restricted cash accounts are presented in the current asset section on the consolidated balance sheets. These accounts are maintained as required by the 2021 Securitization, its indenture, and other related agreements, and can only be used for purposes specified in those agreements. The presentation is based on the expected date of cash distribution.
Specifically, the consolidated balance sheet details the assets, including current assets such as cash and cash equivalents and restricted cash. For example, in 2023, Churchs Chicken reported restricted cash of $2,163,000, and in 2022, the restricted cash was $3,066,000. These figures are part of the total current assets, which also include items like accounts receivable, inventory, and prepaid expenses.
This means that a potential Churchs Chicken franchisee should be aware that the company maintains restricted cash accounts for specific purposes related to its securitization agreements. These funds are not freely available for general use and are earmarked for particular obligations. Understanding the nature and extent of these restricted cash accounts can provide insight into the financial obligations and constraints of the company.