Under what circumstances does Exit write off receivables?

According to Exit's 2025 Franchise Disclosure Document, the company writes off receivables when there is information indicating that the debtor is facing significant financial difficulty and there is no possibility of recovery. If any recoveries are made from accounts previously written off, these recoveries will be recognized as income or as an offset to credit loss expense in the year the recovery occurs, following Exit's accounting policy. This policy is part of Exit's approach to managing financial instruments and credit losses.

Exit estimates expected credit losses on trade receivables based on historical credit loss experience, current economic conditions, and reasonable forecasts affecting the collectability of these receivables. The credit risk profile of trade receivables is categorized based on credit quality indicators, which Exit uses to determine appropriate allowances for expected credit losses. Determining these expected credit losses involves significant judgments and estimates, and changes in economic conditions or customer payment behavior may impact the allowance for credit losses.

For prospective franchisees, this means that Exit has a defined process for managing and accounting for potential credit losses from outstanding payments. Understanding this policy can help franchisees assess the financial stability and risk management practices of Exit. Franchisees should be aware that the accuracy of these estimates depends on various factors, including economic conditions and customer payment behavior, which can change over time. The FDD also notes that the total amount of provision for credit losses related to trade accounts receivable and notes receivable were $351,755 for the year ending December 31, 2024, $1,304,737 for 2023, and $382,936 for 2022.