What is the process Counselor Realty uses to determine when receivables are deemed uncollectible?
Counselor_Realty Franchise · 2025 FDDAnswer from 2025 FDD Document
4, 2023 and 2022
Accounts Receivable
The Company 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. Such allowance is based on the credit losses expected to arise over the life of the asset which includes consideration of past events and historical loss experience, current events and also future events based on our expectation as of the balance sheet date. Receivables are written off when the Company determines that such receivables are deemed uncollectible. The Company pools its receivables based on similar risk characteristics in estimating its expected credit losses. In situations where a receivable does not share the same risk characteristics with other receivables, the Company measures those receivables individually. The Company also continuously evaluates such pooling decisions and adjusts as needed from period to period as risk characteristics change.
The Company utilizes the aging method in determining its lifetime expected credit losses on its receivables. This method is used for 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. Such forecasted information includes: GDP growth, unemployment rates and interest rates, amongst others.
Accounts receivable consists of franchise related fees. Accounts receivable are unsecured and the Company charges 8% interest on past due accounts. Accounts receivable are considered past due if not paid within the terms established. Accounts receivable are written off when they are determined to be uncollectible. The allowance for credit losses was $1,574 and $3,724 as
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 32)
What This Means (2025 FDD)
According to Counselor Realty's 2025 Franchise Disclosure Document, the company writes off receivables when they are determined to be uncollectible. To account for potential credit losses, Counselor Realty maintains an allowance for credit losses for trade and other receivables, ensuring the net amount expected to be collected is accurately presented on the balance sheet. This allowance is calculated based on expected credit losses over the life of the asset, considering past events, historical loss experience, current events, and future expectations as of the balance sheet date.
Counselor Realty pools its receivables based on similar risk characteristics to estimate expected credit losses. Receivables that do not share the same risk characteristics are measured individually. The company continuously evaluates these pooling decisions and adjusts them as needed to reflect changes in risk characteristics. The company uses 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 loss rates, Counselor Realty evaluates information related to its historical losses, adjusting for current conditions and the period of time that can be reasonably forecasted. These adjustments consider factors such as past due receivables, customer creditworthiness, changes in receivable terms, and the impact of external forces like competition and legal/regulatory requirements. For receivables not expected to be collected within the normal business cycle, the company considers current and forecasted economic and business environment conditions, including GDP growth, unemployment rates, and interest rates. Accounts receivable consists of franchise related fees. Accounts receivable are unsecured and the Company charges 8% interest on past due accounts. Accounts receivable are considered past due if not paid within the terms established. The allowance for credit losses was $1,574 and $3,724 as of December 31, 2024 and 2023, respectively.
For a prospective Counselor Realty franchisee, this means that the franchisor has a structured approach to managing and accounting for potential uncollectible franchise fees. Understanding this process can provide insight into the financial stability and risk management practices of Counselor Realty. Franchisees should inquire about the historical loss experience and the specific criteria used to assess creditworthiness to better understand the potential for disputes or collection issues.