What was the allowance for credit losses for Clean Your Dirty Face at December 31, 2024?
Clean_Your_Dirty_Face Franchise · 2025 FDDAnswer from 2025 FDD Document
ulate the expected allowance for credit losses as the Company's franchisees have remained constant since the Company's inception.
Management has determined that the allowance for credit losses is not material to the financial statements, and therefore the allowance for credit losses is $0 at December 31, 2024 and 2023, respectively.
The Company writes off receivables as a deduction from the allowance for credit losses when there is information that indicates the debtor is facing significant financial difficulty and there is no possibility of recovery. If any recoveries are made from any accounts previously written off, they will be recognized as income or an offset to credit loss expense in the year of recovery, in accordance with the Company's accounting policy election. The total amount of write-offs was immaterial to the financial statements as a whole for the
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 54)
What This Means (2025 FDD)
According to Clean Your Dirty Face's 2025 Franchise Disclosure Document, the allowance for credit losses was $0 at December 31, 2024. The document states that management determined this allowance was not material to the financial statements. The allowance for credit losses is calculated on a pooled basis where similar risk characteristics exist. Receivables are evaluated individually when they do not share similar risk characteristics which could exist in circumstances where amounts are considered at risk or uncollectible. The allowance is derived from a review of the Company's historical losses and is adjusted for management's assessment of current conditions, reasonable and supportable forecasts regarding future events, and any other factors deemed relevant by the Company.
Clean Your Dirty Face writes off receivables as a deduction from the allowance for credit losses when there is information that indicates the debtor is facing significant financial difficulty and there is no possibility of recovery. Any recoveries from accounts previously written off are recognized as income or an offset to credit loss expense in the year of recovery. The total amount of write-offs was immaterial to the financial statements for the years ending December 31, 2024 and 2023. The amount of credit loss expense was also $0 for both years.
For a prospective franchisee, this indicates that Clean Your Dirty Face has not experienced material credit losses from its franchisees. This could be due to a variety of factors, such as a strong franchisee base, effective collection practices, or a conservative approach to revenue recognition. However, it is important to note that this is just one point in time, and the allowance for credit losses could change in the future. A prospective franchisee may want to inquire about the factors that contribute to the low allowance for credit losses and whether Clean Your Dirty Face anticipates any changes in the future.