When are Cicis' account balances charged against the allowance?

According to Cicis's 2025 Franchise Disclosure Document, account balances are charged against the allowance for credit losses after all means of collection have been exhausted and the potential for recovery is considered remote. This policy is consistent with Accounting Standards Codification (ASC) 326, which Cicis adopted as of January 1, 2023. This standard requires the company to estimate probable credit losses in its existing accounts receivable based on historical loss patterns, the number of days billings are past due, and an evaluation of potential loss risks associated with specific accounts.

For a prospective Cicis franchisee, this means that Cicis has a process in place to account for potential uncollectible receivables, which primarily consist of accrued royalty fees, marketing contribution receivables, and vendor rebates. These receivables are generally collected weekly in arrears. The allowance for credit losses represents Cicis's best estimate of the amount of probable credit losses. As of December 31, 2024, Cicis recorded an allowance for credit losses of $30,166, while the allowance was $0 as of December 31, 2023.

This accounting practice provides transparency into how Cicis manages and accounts for potential financial risks associated with unpaid fees and contributions from franchisees and other sources. Franchisees should be aware that Cicis actively monitors accounts receivable and has a mechanism to write off uncollectible amounts after exhausting collection efforts. This may also indicate the level of financial scrutiny Cicis applies to franchisee accounts and the importance of timely payments of royalties and fees.