How often does Costa Vida Fresh Mexican Grill review its allowance for doubtful accounts?
Costa_Vida_Fresh_Mexican_Grill Franchise · 2025 FDDAnswer from 2025 FDD Document
Accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is management's best estimate of the amount of probable credit losses in the Company's existing accounts receivable. Management determines the allowance based on historical write-off experience and reviews its allowance for doubtful accounts annually. All account balances are reviewed on an individual basis and charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Management's evaluation resulted in no allowance for doubtful accounts as of December 31, 2024, 2023, and 2022.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 66)
What This Means (2025 FDD)
According to Costa Vida Fresh Mexican Grill's 2025 Franchise Disclosure Document, the company reviews its allowance for doubtful accounts on an annual basis. The allowance for doubtful accounts represents management's best estimate of potential credit losses within the company's existing accounts receivable. This estimate is determined by management through an analysis of historical write-off experience.
In practical terms, this means that Costa Vida Fresh Mexican Grill assesses the collectability of its accounts receivable at least once a year. This process helps the company ensure that its financial statements accurately reflect the risk of uncollectible debts from franchisees. According to the 2025 FDD, management reviews all account balances individually and charges them off against the allowance after exhausting all collection methods and determining that recovery is unlikely.
For the years 2024, 2023 and 2022, Costa Vida Fresh Mexican Grill's management evaluation resulted in no allowance for doubtful accounts. This suggests that the company has been successful in collecting its receivables from franchisees and does not anticipate significant credit losses. A prospective franchisee should inquire about the criteria and process Costa Vida Fresh Mexican Grill uses to evaluate and manage franchisee credit risk, and what factors could cause this allowance to change in the future.