Does Gold Star charge interest on its past due receivables?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
Accounts receivable consist of amounts due from customers and are generally unsecured.
The Company establishes allowances for credit losses on accounts receivable. The allowance for credit losses is the Company's best estimate of the amount of probable credit losses in the Company's existing accounts receivable and is based upon historical loss patterns, the number of days that billings are past due, and an evaluation of the potential risk of loss associated with specific accounts. The measurement of credit losses and subsequent changes in the allowance for credit losses are recorded in the consolidated statements of income within selling, general, and administrative expenses as the amounts expected to be collected change.
In order to estimate expected credit losses, the Company assesses recent historical experience, current economic conditions, and any reasonable and supportable forecasts to identify risk characteristics that are shared within the financial asset. These risk characteristics are then used to bifurcate the aging method into risk pools. Historical credit loss for each risk pool is then applied to the current period aging in the identified risk pools to determine the needed reserve allowance. In the absence of current economic conditions and/or forecasts that may affect future credit losses, the Company has determined that recent historical experience provides the best basis for estimating credit losses.
The determination of past due status on accounts receivable is based on the terms indicated on customer contracts and invoices. Accounts are written off against the allowance when deemed uncollectible by management. Recoveries of accounts receivable previously written off are recorded when received. The Company does not charge interest on its past due receivables.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, Gold Star does not charge interest on its past due receivables. However, the company does establish allowances for credit losses on accounts receivable. These allowances are the company's best estimate of probable credit losses in its existing accounts receivable. The estimate is based on historical loss patterns, the number of days that billings are past due, and an evaluation of the potential risk of loss associated with specific accounts.
The measurement of credit losses and subsequent changes in the allowance for credit losses are recorded as selling, general, and administrative expenses as the amounts expected to be collected change. To estimate expected credit losses, Gold Star assesses recent historical experience, current economic conditions, and any reasonable and supportable forecasts to identify risk characteristics shared within the financial asset. These risk characteristics are then used to bifurcate the aging method into risk pools. Historical credit loss for each risk pool is then applied to the current period aging in the identified risk pools to determine the needed reserve allowance.
The determination of past due status on accounts receivable is based on the terms indicated on customer contracts and invoices. Accounts are written off against the allowance when deemed uncollectible by management. Recoveries of accounts receivable previously written off are recorded when received. While Gold Star does not charge interest on past due amounts, franchisees should be aware that the franchisor actively manages and accounts for potential credit losses, which could impact the overall financial performance of the franchise system.