What factors does Exit consider when estimating expected credit losses on trade receivables?

According to Exit's 2025 Franchise Disclosure Document, the company estimates expected credit losses on trade receivables by considering several factors. These include historical credit loss experience, current economic conditions, and reasonable and supportable forecasts that could affect the collectability of these receivables. This approach aligns with standard accounting practices, ensuring that Exit's financial statements accurately reflect potential losses.

Exit also categorizes the credit risk profile of its trade receivables based on credit quality indicators. This categorization helps Exit determine appropriate allowances for expected credit losses. By assessing the risk associated with different receivables, Exit can tailor its loss estimates to reflect the specific circumstances of each account. This targeted approach enhances the accuracy of Exit's financial reporting and provides a more realistic view of its financial health.

The determination of expected credit losses involves significant judgments and estimates by Exit's management. Changes in economic conditions or customer payment behavior may impact the allowance for credit losses. This highlights the inherent uncertainty in estimating credit losses and the potential for adjustments based on evolving circumstances. For prospective franchisees, this means that Exit's financial performance, as reflected in its financial statements, is subject to some degree of estimation and could change over time.