What factors does Fly Fitness consider when determining the collectability of its accounts receivable?
Fly_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
The majority of the Company's trade accounts receivable result from royalty and franchise fees due from franchisees. The Company determines collectability of its receivables by considering a number of factors, including the Company's previous loss history, the franchisee's current ability to pay its obligations to the Company, and the condition of the general economy and industry as a whole. The Company considers trade accounts receivable to be fully collectible; and accordingly, no allowance for doubtful accounts is required.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 44)
What This Means (2024 FDD)
According to Fly Fitness's 2024 Franchise Disclosure Document, the company considers several factors when determining the collectability of its accounts receivable. These receivables primarily come from royalty and franchise fees due from franchisees.
Fly Fitness assesses collectability by considering its previous loss history, which provides insight into potential future losses. They also evaluate the franchisee's current ability to pay their obligations to Fly Fitness, which involves assessing the franchisee's financial health and payment history.
Additionally, Fly Fitness takes into account the condition of the general economy and the fitness industry as a whole. These factors can impact a franchisee's ability to generate revenue and, consequently, their ability to pay fees. Based on these considerations, Fly Fitness deemed its trade accounts receivable to be fully collectible as of the financial statement date, and therefore did not require an allowance for doubtful accounts.