What is the reported credit loss expense for Crepe De Licious?
Crepe_De_Licious Franchise · 2025 FDDAnswer from 2025 FDD Document
In 2023, there was a significant change in the amount of the provision for credit losses due to two franchises declaring bankruptcy. The Company believes this to be a one-time event and does not anticipate this situation to occur in future years.
The allowance estimate is derived from a review of the Company's historical losses based on the aging of its accounts and rebates receivables. This estimate is adjusted for management's assessment of current conditions, reasonable and supportable forecasts regarding future events, and any other factors deemed relevant by the Company. The Company believes historical loss information is a reasonable starting point in which to calculate the expected allowance for credit losses as the Company's portfolio segments have remained consistent. As discussed in Note 3, the Company believes that the 2023 credit loss is unique and does not anticipate it to be reflective of future expected credit losses. Therefore, management believes no allowance for credit losses is necessary as of December 31, 2024. During 2023, the Company had franchisees declare bankruptcy, the Company had anticipated higher than expected credit losses that were incurred in the past. As a result, management has individually assessed these balances for an allowance for credit losses as of December 31, 2023. During 2024, the accounts receivables were written off against the allowance.
Source: Item 23 — RECEIPTS (FDD pages 57–233)
What This Means (2025 FDD)
According to Crepe De Licious's 2025 Franchise Disclosure Document, in 2023, there was a significant change in the amount of the provision for credit losses due to two franchises declaring bankruptcy. The company believes this to be a one-time event and does not anticipate this situation to occur in future years.
For a potential Crepe De Licious franchisee, this indicates that the franchisor experienced unexpected credit losses in 2023 due to franchisee bankruptcies. While the company views this as a non-recurring event, it highlights the financial risks associated with franchising, where the financial health of individual franchisees can impact the franchisor's financial statements.
Furthermore, the FDD states that for 2024, management believes no allowance for credit losses is necessary as of December 31, 2024. During 2023, the Company had franchisees declare bankruptcy, and the Company had anticipated higher than expected credit losses that were incurred in the past. As a result, management has individually assessed these balances for an allowance for credit losses as of December 31, 2023. During 2024, the accounts receivables were written off against the allowance. This suggests that Crepe De Licious took steps to address the credit losses from 2023 by writing off receivables and individually assessing balances. It also indicates that the company's management does not foresee similar credit loss issues in the immediate future.