What accounting method does Crave use to recognize bad debts related to royalties receivable?
Crave Franchise · 2025 FDDAnswer from 2025 FDD Document
Management considers receivables to be fully collectible. If amounts become uncollectible, they are charged to operations in the period in which that determination is made. Accounting principles generally accepted in the United States of America require that the allowance method be used to recognize bad debts; however, the effect of using the direct write-off method is not materially different from the results that would have been obtained under the allowance method. No write-offs were made in the reporting period.
Source: Item 23 — RECEIPTS (FDD pages 63–253)
What This Means (2025 FDD)
According to Crave's 2025 Franchise Disclosure Document, Crave considers its royalties receivable to be fully collectible. However, if some amounts become uncollectible, Crave charges those amounts to operations in the period the determination is made.
While accounting principles generally accepted in the United States of America (GAAP) require the allowance method to recognize bad debts, Crave uses the direct write-off method. Crave states that using the direct write-off method does not materially differ from the results obtained under the allowance method.
For the year ending December 31, 2024, Crave did not have any write-offs and did not deem an allowance necessary. This means that, based on their assessment, all royalties receivable were expected to be collected, and no adjustments were needed for potential bad debts.