How does Crave Cookies provide for credit losses?
Crave_Cookies Franchise · 2025 FDDAnswer from 2025 FDD Document
Contract receivables - accounts receivable are stated at the amount of consideration from customers of which the Company has an unconditional right to receive. The Company provides an allowance for credit losses, which is based upon a review of outstanding receivables, historical collection information and existing economic conditions. As of December 31, 2024, there was no allowance for credit losses recorded.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 47)
What This Means (2025 FDD)
According to Crave Cookies' 2025 Franchise Disclosure Document, the company addresses potential credit losses from customer receivables through a specific accounting policy. The FDD states that accounts receivable are recorded at the amount of consideration the company is unconditionally entitled to receive from its customers. To account for potential non-payment, Crave Cookies provides an allowance for credit losses. This allowance is determined by reviewing outstanding receivables, analyzing historical collection data, and assessing current economic conditions.
For prospective franchisees, this means that Crave Cookies actively manages and accounts for the risk of customers not paying their dues. This proactive approach helps in maintaining accurate financial statements and provides a realistic view of the company's financial health. It also aligns with standard accounting practices, ensuring that the financial statements reflect potential losses due to uncollectible receivables.
Notably, as of December 31, 2024, the FDD indicates that there was no allowance for credit losses recorded. This could imply that Crave Cookies had not experienced significant issues with uncollectible accounts receivable up to that point. However, for the year ended December 31, 2023, Crave Cookies recorded a credit loss expense of $5,000 related to doubtful accounts receivable where collectability was not reasonably assured. This indicates that while the company generally maintains a good track record with collections, there can be instances where losses are recognized.
Furthermore, the FDD mentions that Crave Cookies generally does not charge interest on past due accounts, and delinquent receivables are written off based on individual credit evaluations and specific customer circumstances. This approach suggests a flexible and case-by-case handling of delinquent accounts, which may be beneficial for franchisees in managing their customer relationships while also protecting the company's financial interests.