What was the allowance for credit losses related to notes receivable for Ledgers in 2023?

According to Ledgers's 2025 Franchise Disclosure Document, the allowance for credit losses related to notes receivable in 2023 was $15,847. This figure represents the company's estimate of the amount of notes receivable that may not be collectible. This is an accounting measure to reduce the book value of the notes receivable by the amount of expected losses.

For a prospective Ledgers franchisee, the allowance for credit losses is relevant because it reflects the risk associated with Ledgers's financing of area representative and unit franchise agreements. These notes receivable are from those agreements. A higher allowance for credit losses could indicate a higher risk of default by franchisees or area representatives who have borrowed money from Ledgers.

It's important to note that during the year ended December 31, 2023, Ledgers's financial statements included balances for a note receivable and deferred revenue for a franchise agreement that was terminated in 2023 but not properly written off in 2023. During the year ended December 31, 2024, Ledgers identified this error and restated its financial statements to properly recognize the termination of the franchise agreement recording $219,118 in bad debt expense for the year ended December 31, 2023 and removing the $752,118 note receivable, and $533,000 deferred revenue balances at December 31, 2023. This restatement could have impacted the allowance for credit losses. A prospective franchisee should inquire about the details of these notes and the collectibility of Ledgers's notes receivable.