How does Deer Solution mitigate credit risk associated with cash deposits?

Based on the 2025 Deer Solution Franchise Disclosure Document, the company addresses potential credit risks related to accounts receivable. Deer Solution carries accounts receivable, which primarily come from initial franchise fees, brand funds, management fees, and royalties, at their estimated collectible amounts, after deducting any allowances for doubtful accounts.

To determine the appropriate allowance for doubtful accounts, Deer Solution reviews outstanding receivables, considers historical collection information, assesses existing economic conditions, and takes into account other relevant factors. This thorough evaluation helps Deer Solution estimate the portion of accounts receivable that may not be collected, allowing them to adjust their financial statements accordingly.

According to the 2025 FDD, management determined that no allowance for doubtful accounts was necessary as of December 31, 2024, and 2023. This suggests that, based on their assessment, the company believed that all outstanding receivables were fully collectible during those periods. However, this assessment is subject to change based on future evaluations and economic conditions.

While the FDD excerpt explains how Deer Solution manages risk related to accounts receivable, it does not provide information on how Deer Solution specifically mitigates credit risk associated with cash deposits. A prospective franchisee should seek clarification from Deer Solution regarding their policies and procedures for managing risks associated with cash deposits, including how they ensure the security and accessibility of funds held in bank accounts or other cash equivalents.