What was the credit loss (recovery) expense for Exit in 2023?
Exit Franchise · 2025 FDDAnswer from 2025 FDD Document
| 2024 | 2023 | 2022 | |
|---|---|---|---|
| Revenue | $ 15,421,227 | $ 15,991,792 | $ 17,858,393 |
| Operating expenses | |||
| Advertising and promotion | 2,335,585 | 2,858,751 | 2,880,073 |
| Amortization and depreciation | 65,563 | 92,338 | 125,888 |
| Ancillary expenses | 155,129 | 159,378 | 209,692 |
| Credit loss (recovery) expense | 351,755 | 1,304,738 | 382,936 |
| Bank charges | 261,316 | 246,186 | 234,654 |
| Commissions | 68,380 | 198,365 | 111,540 |
| Contract services | 951,910 | 883,805 | 972,546 |
| Fees and dues | 27,450 | 30,231 | 33,494 |
| Information technology | 504,587 | 519,057 | 470,750 |
| Insurance | 158,867 | 146,300 | 97,700 |
| Office and general | 83,168 | 64,051 | 83,463 |
| Postage and delivery | 50,372 | 77,943 | 102,833 |
| Professional fees | 921,810 | 512,417 | 334,687 |
| Rent | 302,011 | 305,396 | 293,000 |
| Repairs and maintenance | - | 2,787 | 8,364 |
| Salaries and benefits | 7,692,843 | 7,205,125 | 7,900,241 |
| Telephone | 18,920 | 25,306 | 26,585 |
| Trade shows and conventions | 1,778,283 | 2,020,763 | 2,845,425 |
| Training and development | 712,731 | 1,078,879 | 1,452,332 |
| Travel | 87,949 | 147,007 | 136,233 |
| Vehicles | 7,335 | 5,902 | 7,405 |
| Miscellaneous | 36,710 | - | - |
| Total operating expenses | 16,572,674 | 17,884,725 | 18,709,841 |
| Loss from operations | (1,151,447) | (1,892,933) | (851,448) |
| Other income (expense) | |||
| Gain on sale of property and equipment | 2,125,033 | - | 20,291 |
| Impairment of digital assets | - | - | (1,820,185) |
| Legal settlement | (1,500,000) | - | - |
| Interest | 137,304 | 78,187 | 170,816 |
| Total other income (expense) | 762,337 | 78,187 | (1,629,078) |
| Loss before provision for income taxes and non-controlling | |||
| interests | (389,110) | (1,814,746) | (2,480,526) |
| Benefit for income taxes | (459,827) | (486,997) | (342,266) |
| Consolidated net income (loss) | 70,717 | (1,327,749) | (2,138,260) |
| Noncontrolling int |
Source: Item 23 — RECEIPT (FDD pages 42–235)
What This Means (2025 FDD)
According to Exit's 2025 Franchise Disclosure Document, the credit loss (recovery) expense for the company in 2023 was $1,304,738. This figure is part of the adjustments made to reconcile net income (loss) to net cash used in or provided by operating activities. Understanding this number is crucial for prospective franchisees as it reflects the amount of money Exit lost due to uncollectible debts or bad credits during that year.
The credit loss (recovery) expense is a key indicator of the financial health and risk management practices of Exit. A high credit loss expense, such as the one reported for 2023, could suggest that Exit is either taking on too much credit risk or is not effectively managing its accounts receivable. This could be due to various factors, including economic conditions, customer payment behavior, or the company's internal policies for extending credit.
For a potential franchisee, this information is valuable because it provides insight into the potential financial risks associated with investing in an Exit franchise. While a single year's figure does not necessarily indicate a long-term trend, it is important to consider the context and reasons behind such a significant credit loss. It would be prudent for a prospective franchisee to inquire about the specific factors that contributed to the high credit loss in 2023 and what measures Exit has taken to mitigate such losses in the future.
It's also important to note that the FDD mentions the company adopted FASB ASU 2016-13 on January 1, 2023, which replaced the incurred loss method with the current expected credit loss (CECL) method. This change requires an estimate of credit losses over the life of financial assets, using historical experience, current conditions, and reasonable forecasts. The $1,304,738 credit loss (recovery) expense in 2023 could be influenced by this new accounting standard, making it even more important for potential franchisees to understand the implications.