Does Fly Fitness maintain an allowance for doubtful accounts, and if not, why?

According to Fly Fitness's 2024 Franchise Disclosure Document, the company addresses credit risk associated with trade accounts and notes receivable. Fly Fitness grants unsecured trade credit to franchisees in the form of trade accounts receivable. Additionally, Fly Fitness has extended credit through notes receivable to stockholders and select franchisees; these notes are not collateralized.

While the FDD acknowledges these credit risks, it does not explicitly state whether Fly Fitness maintains an allowance for doubtful accounts. An allowance for doubtful accounts is a contra-asset account used to estimate the amount of accounts receivable that a company may not be able to collect. This is a common accounting practice to account for potential losses from customers who may default on their payments.

Given that the financial statements are prepared in accordance with generally accepted accounting principles (GAAP), it is likely that Fly Fitness would follow standard accounting practices for managing credit risk. However, without explicit mention of an allowance for doubtful accounts, prospective franchisees should inquire directly with Fly Fitness about their specific policies and procedures for managing and accounting for uncollectible receivables. Understanding these policies is crucial for assessing the financial stability and risk management practices of Fly Fitness.