What primarily constitutes Cicis' accounts receivable?
Cicis Franchise · 2025 FDDAnswer from 2025 FDD Document
| ------------- | ||
|---|---|---|
| Cash and cash equivalents | $ 1,854,735 | $ 2,931,372 |
| Cash and cash equivalents—marketing fund, restricted | 434,199 | 771,794 |
| $ 2,288,934 | $ 3,703,166 |
Accounts receivable: Accounts receivable consist primarily of accrued royalty fees and marketing contribution receivables, generally collected weekly in arrears, and vendor rebates. Unpaid accounts receivable with invoice dates over 30 days are non-interest bearing. All accounts receivable are entered into on an unsecured basis. Accounts receivable, trade receivables at December 31, 2022 were $186,610. Accounts receivable, marketing fund, restricted at December 31, 2022 were $1,556,337.
Note 1. Organization and Summary of Significant Accounting Policies (Continued)
The Company adopted Accounting Standards Codification (ASC) 326, Financial Instruments—Credit Losses (ASC 326), as of January 1, 2023, with the cumulative-effect transition method with the required prospective approach. The measurement of expected credit losses under the current expected credit loss (CECL) methodology is applicable to financial assets measured at amortized cost, which include accounts receivable. An allowance for credit losses under the CECL methodology is determined using the loss-rate approach and measured on a collective (pool) basis when similar risk characteristics exist. Where financial instruments do not share risk characteristics, they are evaluated on an individual basis. The adoption of ASC 326 had no material impact on the Company's combined financial statements.
Consistent with ASC 326, the Company offsets accounts receivable with an allowance for credit losses. The allowance for credit losses is the Company's best estimate of the amount of probable credit losses in the Company's existing accounts receivable and is based on historical loss patterns, the number of days that billings are past due, and an evaluation of the potential risk of loss associated with specific accounts. Account balances are charged against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Recoverie
Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 58–64)
What This Means (2025 FDD)
According to Cicis' 2025 Franchise Disclosure Document, the company's accounts receivable primarily consist of accrued royalty fees, marketing contribution receivables, and vendor rebates. These receivables are generally collected weekly in arrears. The FDD specifies that unpaid accounts receivable with invoice dates over 30 days are non-interest bearing, and all accounts receivable are entered into on an unsecured basis.
As of December 31, 2022, Cicis' accounts receivable, trade receivables amounted to $186,610, while accounts receivable for the marketing fund, which is restricted, totaled $1,556,337. This distinction is important for prospective franchisees to understand, as the marketing fund is specifically earmarked for advertising, public relations, and other activities aimed at enhancing the Cicis brand.
In 2023, Cicis adopted Accounting Standards Codification (ASC) 326, which pertains to financial instruments and credit losses. As of December 31, 2024 and 2023, the company recorded an allowance for credit losses of $30,166 and $0, respectively. This allowance is the company's best estimate of potential credit losses within its existing accounts receivable, based on historical loss patterns and the age of outstanding billings. This indicates Cicis' approach to managing and accounting for potential uncollectible amounts.