What factors does Coffee News consider when determining uncollectible accounts receivable?

According to the 2025 Coffee News Franchise Disclosure Document, Coffee News USA, Inc. adopted FASB Accounting Standards Update (ASU) 2016-13, Financial Instruments—Credit Losses (Topic 326) effective January 1, 2024. This update modifies how Coffee News measures expected claims and credit losses on financial instruments, requiring the measurement and recognition of expected versus incurred losses for financial assets held, including franchisee accounts receivable. The adoption of this ASU did not have a material impact on the company's financial statements.

For a Coffee News franchisee, this means that Coffee News USA, Inc. is actively assessing the collectibility of its accounts receivable from franchisees. They are using a forward-looking approach by considering expected losses rather than just past losses. This may lead to more proactive measures to manage franchisee debt and potentially affect the credit terms offered to new franchisees.

While the FDD mentions the adoption of ASU 2016-13, it does not specifically detail the exact factors Coffee News considers when determining which accounts receivable are uncollectible. A prospective franchisee should ask Coffee News for more specific information about their policies and procedures for assessing credit risk and determining uncollectible accounts. Understanding these factors can help a franchisee better anticipate how Coffee News will manage franchisee accounts receivable and what actions might be taken if a franchisee falls behind on payments.