What factors does Dq Treat consider when estimating future write-offs for accounts receivable?

According to Dq Treat's 2025 Franchise Disclosure Document, the company estimates future write-offs for accounts receivable based on several factors. These factors include delinquencies, aging trends, industry risk trends, its historical experience, and current trends. Accounts and notes receivable consist primarily of service fees, franchise sales fees, and advertising fees due principally from franchisees and gift card receivables. Accounts receivable are recorded net of an allowance for expected credit losses. The allowance is recognized in an amount equal to anticipated future write-offs.

For a prospective Dq Treat franchisee, this means that the financial health and payment behavior of existing franchisees, as well as broader industry and economic conditions, can influence how Dq Treat assesses the risk of uncollectible accounts. This assessment directly impacts the allowance for credit losses reported in Dq Treat's financial statements.

The allowance for credit losses was $1,501,000 in 2024 and $903,000 in 2023. Understanding these factors can provide franchisees with insight into how Dq Treat manages its financial risks and the potential impact on its financial reporting. Franchisees should inquire about the specific methodologies and data Dq Treat uses to determine these estimates to better understand the company's financial management practices.