Does Hck Hot Chicken maintain an allowance for doubtful accounts, and if not, why?
Hck_Hot_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisor, its agents, or representatives may, at any reasonable time during normal working hours, audit or review Franchisee's books and records in accordance with generally accepted standards established by certified public accountants.
Franchisor may also conduct the audit at a site other than the Location and Franchise shall provide all information to Franchisor, its agents, or representatives, promptly upon demand (but not later than five days following the date of the request).
If any audit or other investigation reveals an
under-reporting or under-recording error, then upon demand Franchisee shall pay the amount determined to be owed, plus interest at the daily equivalent of twelve percent (12%) per year simple interest, not to exceed the highest rate permitted by Applicable Law. In addition, if any such audit or other investigation reveals an under-reporting or under-recording error of two percent (2%) or more or if Franchisee fails to submit any reports when due, then in addition to any other sums due and in addition to any other rights and remedies it may have, including the right to terminate this Agreement as provided in Section 14, the expenses of the audit/inspection shall be borne and paid by Franchisee upon billing by Franchisor, which shall include Franchisor's Travel Expenses and Wages and reasonable accounting and legal expense. Without limiting the foregoing, if such audit or other investigation reveals an under-reporting or under-recording error of five percent (5%) percent or more, Franchisor, in addition to any other rights and remedies it may have, including the right to terminate this Agreement as provided in Section 14, may require Franchisee to maintain and deliver to Franchisor from time to time, financial statements audited by an independent certified public accountant.
10.4 Books and Records. Franchisee shall maintain an accounting and record keeping system, in accordance with sound business practices, which shall provide for basic accounting information necessary to prepare financial statements, a general ledger, and reports required by this Agreement and the HCK Hot Chicken Brand Standards Manual. Franchisee shall maintain accurate, adequate, and verifiable books and supporting documentation relating to such accounting information.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 54)
What This Means (2025 FDD)
Based on the 2025 Franchise Disclosure Document, there is no mention of Hck Hot Chicken maintaining an allowance for doubtful accounts. The FDD excerpts focus on financial reporting requirements for franchisees, audits, and the handling of under-reporting errors. Franchisees are required to maintain an accounting and record-keeping system, submit gross sales reports, and provide unaudited financial statements annually.
The franchisor, Hck Hot Chicken, has the right to audit the franchisee's books and records and can impose penalties for under-reporting of sales, including interest and covering the expenses of the audit. Franchisees must also participate in various ordering systems and maintain compliance with EMV standards for credit card usage. The Hck Hot Chicken Brand Standards Manual contains standard procedures, policies, rules and regulations established by the franchisor.
While the FDD details financial obligations and reporting requirements for franchisees, it does not specify whether Hck Hot Chicken itself maintains an allowance for doubtful accounts. A prospective franchisee should directly ask Hck Hot Chicken about their policies regarding doubtful accounts and how they manage potential uncollectible receivables.