What was the bad debt expense for City Wide in 2023?
City_Wide Franchise · 2025 FDDAnswer from 2025 FDD Document
| Net income | | $ 19,161,078 | | $ 14,196,288 | | $ 10,941,550 | | Items not requiring (providing) cash | | | | | | | Depreciation | 999,912 | 1,063,068 | 1,095,919 | | | | Bad debt expense | 160,526 | 54,103 | 13,153 | | | | Noncash operating lease cost | 94,315 | 91,359 | 88,451 | | | | Loss on abandonment of software subscription | 1,454,554 | | - | | - | | Effect of foreign currency translation (gain) loss | 39,507 | (6,653) | 26,999 | | | | Deferred compensation | 455,292 | 614,155 | | - | | | Changes in | | | | | | Accounts receivable | (838,659) | (645,018) | (691,842) | | | | Deferred franchise costs and prepaid expenses | (319,698) | 46,486 | (241,676) | | | | Inventory | 58,725 | (75) | (8,355) | | | | Software subscription | (631,500) | (891,054) | | - | | | Accounts payable | 3,969,091 | 2,603,540 | 3,211,061 | | | | Accrued expenses | 920,639 | 113,353 | 363,757 | | | | Operating lease liabilities | (182,963) | (180,007) | (177,099) | | | | Deferred franchise revenue and other deferred income | 503,293 | 555,702 | 1,223,390 | | | | Deferred compensation | (340,500) | (144,863) | 119,200 | | | | Refundable advance | (1,618,485) | 2,041,208 | | - | | | | Net cash provided by operating activities | 23,885,127 | 19,511,592 | 15,964,508 | | |
Source: Item 23 — RECEIPT (FDD pages 65–271)
What This Means (2025 FDD)
According to City Wide's 2025 Franchise Disclosure Document, the bad debt expense for the company in 2023 was $54,103. This figure reflects the amount of accounts receivable that City Wide estimates will not be collected and is recognized as an expense on the company's income statement. Bad debt expense is a normal part of doing business, especially when offering credit terms to clients. It represents a reduction in the company's assets due to uncollectible accounts. Franchisees should be aware of this expense as it can impact the overall profitability of the company.
For a prospective City Wide franchisee, understanding the bad debt expense is important because it provides insight into the credit risk management practices of the company. A higher bad debt expense could indicate a more lenient credit policy or difficulties in collecting payments from customers. This could potentially affect the financial stability of the company and, by extension, the support and resources available to franchisees. Therefore, it is prudent for potential franchisees to inquire about City Wide's credit policies, collection procedures, and historical bad debt expense trends to assess the financial health and risk management practices of the company.
Benchmarking the bad debt expense against industry averages can also be a useful exercise. If City Wide's bad debt expense is significantly higher than the industry average, it may warrant further investigation to understand the underlying causes and potential implications. Conversely, a lower bad debt expense could indicate effective credit management practices and a financially stable customer base. Franchisees should also consider how bad debt expense might affect their own operations and financial performance. While franchisees may not directly bear the bad debt expense of the parent company, a financially healthy franchisor is better positioned to provide support, invest in marketing, and innovate, all of which can benefit the entire franchise system.
In summary, the $54,103 bad debt expense reported by City Wide for 2023 is a relevant data point for prospective franchisees to consider as part of their due diligence. It provides insights into the company's credit risk management practices and overall financial health. By comparing this figure to industry averages and inquiring about the company's credit policies, potential franchisees can gain a better understanding of the risks and opportunities associated with investing in a City Wide franchise.