What is the dependency between the determination of uncollectible receivables and the writing off of those receivables at Counselor Realty?

According to Counselor Realty's 2025 Franchise Disclosure Document, the company writes off accounts receivable when they are determined to be uncollectible. This means that Counselor Realty does not write off an account simply because it is past due. Instead, they must first assess the likelihood of the debt being recovered.

Counselor Realty recognizes an allowance for credit losses for trade and other receivables to present the net amount expected to be collected as of the balance sheet date. This allowance is based on the credit losses expected to arise over the life of the asset, considering past events, historical loss experience, current events, and future expectations. The company pools its receivables based on similar risk characteristics to estimate expected credit losses, and individually measures receivables that do not share the same risk characteristics with other receivables.

Counselor Realty utilizes the aging method to determine lifetime expected credit losses on its receivables, calculating an estimate of losses based primarily on the company's historical loss experience. In determining its loss rates, the company evaluates information related to its historical losses, adjusted for current conditions and further adjusted for the period of time that can be reasonably forecasted. Qualitative and quantitative adjustments related to current conditions and the reasonable and supportable forecast period consider all the following: past due receivables, the customer creditworthiness, changes in the terms of receivables, effect of other external forces such as competition and legal and regulatory requirements on the level of estimated credit losses in the existing receivables. For receivables that are not expected to be collected within the normal business cycle, the company considers current and forecasted direction of the economic and business environment, including GDP growth, unemployment rates and interest rates.

For a prospective franchisee, this indicates that Counselor Realty has a process in place to manage and account for potential credit losses from franchisees. The allowance for credit losses was $1,574 and $3,724 as of December 31, 2024 and 2023, respectively. Understanding this process can help franchisees better understand the financial health and stability of the franchisor.