How does Cinnabon determine the allowance for credit losses related to accounts receivable?

According to Cinnabon's 2025 Franchise Disclosure Document, the company determines its allowance for credit losses based on several factors. These include the aging of customer receivables, which involves analyzing how long invoices have been outstanding, and the company's historical experience with write-offs. Cinnabon also considers the financial health of its franchisees, licensees, and vendors, as their ability to pay directly impacts the recoverability of receivables.

In addition to these specific factors, Cinnabon takes into account broader economic conditions and forecasts of future conditions. This implies that the company adjusts its allowance for credit losses to reflect the current and expected economic climate, which can affect the ability of its business partners to meet their financial obligations. By considering these elements, Cinnabon aims to establish a reasonable estimate of potential credit losses.

Accounts receivable are written off against the allowance for credit losses when it is probable the receivable will not be recovered. The FDD states that the ultimate recovery of recorded receivables depends on future economic events and other conditions that may be beyond Cinnabon's control. For the fiscal year 2024, the allowance for credit losses was $1,748, and for 2023, it was $1,143. Accounts receivable, net of allowance for credit losses, were $44,272 in 2024 and $37,049 in 2023.