How does City Wide estimate the expected amount of uncollectible accounts and notes receivable?
City_Wide Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company makes estimates for the expected amount of accounts and notes receivable to be uncollectible. These amounts are subject to change based on customer circumstances.
Accounts receivable are ordinarily due upon the issuance of the invoice. Delinquent receivables are written off based on individual credit evaluation and specific circumstances of the customer.
During the years ended December 31, 2024, 2023, and 2022, credit loss expense related to doubtful accounts receivable, where collectability is not reasonably assured, was $160,526, $54,103, and $13,153, respectively.
Notes receivable are offered to franchisees to support net working capital needs in the form of a promissory note.
Notes receivable are stated at the outstanding principal amount, net of allowance for credit loss on notes, if any. The Company provides an allowance for credit loss on notes, which is based upon a review of outstanding receivables, historical collection information and existing economic conditions adjusted for current conditions and reasonable and supportable forecasts. Outstanding notes accrue interest based on the terms of the respective note agreements. Delinquent notes are written off based on individual credit evaluation and specific circumstances of the borrower. There was no allowance for credit losses on notes recorded for the years ended December 31, 2024, 2023, and 2022.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 65)
What This Means (2025 FDD)
According to City Wide's 2025 Franchise Disclosure Document, the company estimates the amount of accounts and notes receivable that may be uncollectible. These estimates are subject to change based on the specific circumstances of each customer. City Wide provides an allowance for credit losses, which is based on a review of outstanding receivables, historical collection data, and existing economic conditions, adjusted for current conditions and reasonable forecasts.
For accounts receivable, City Wide writes off delinquent receivables based on individual credit evaluations and the specific circumstances of the customer. During the years ended December 31, 2024, 2023, and 2022, credit loss expense related to doubtful accounts receivable, where collectability is not reasonably assured, was $160,526, $54,103, and $13,153, respectively.
For notes receivable, which are offered to franchisees to support net working capital needs, City Wide states these at the outstanding principal amount, net of allowance for credit loss on notes, if any. Delinquent notes are written off based on individual credit evaluation and specific circumstances of the borrower. The FDD states that there was no allowance for credit losses on notes recorded for the years ended December 31, 2024, 2023, and 2022.
Prospective franchisees should be aware that these estimates can impact City Wide's financial statements and could potentially affect the financial health of the company. Understanding how City Wide manages and accounts for potential credit losses is important for assessing the overall financial risk associated with the franchise.