What was the amount of notes receivable for Ledgers in 2023?
Ledgers Franchise · 2025 FDDAnswer from 2025 FDD Document
| 2 | 024 | 2023 | 2022 | |
|---|---|---|---|---|
| Notes receivable - Principal | $ | $ 40,000 | $ 853,748 | |
| Notes receivable - Accrued interest | 7 | - | 16,607 | 10,153 |
| = | 56,607 | 863,901 | ||
| Allowance for credit losses | §2 | == | (15,847) | |
| $ | $ 40,760 | $ 863,901 |
| 2 | Assets | ||||||
|---|---|---|---|---|---|---|---|
| 2024 | 2023 | 2022 | |||||
| Current Assets: | S | ||||||
| Cash and cash equivalents | $ 424,085 | $ 181,077 | $ 264,411 | ||||
| Royalty receivables | 3,190 | 3,302 | - | ||||
| Notes receivable, current | 40,760 | 229,901 | |||||
| Total Current Assets | 427,275 | 225,139 | 494,312 | ||||
| Non-Current Assets: | |||||||
| Notes receivable, less current portion | = | 634,000 |
NOTE 4 - NOTES RECEIVABLE
Notes receivable consists of financed area representative and unit franchise agreements. Promissory notes boar interest up to 12%. Amounts due as of December 31 are as follows:
| Previously | As | |
|---|---|---|
| 2023 Restatement | Reported | Restated |
| Members' equity - January 1, 2024 | $1,374,619 | $1,155,501 |
| Notes Receivable | 792,878 | 40,760 |
During the year ended December 31, 2023, the Company'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, the Company 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.
Source: Item 22 — CONTRACTS (FDD page 46)
What This Means (2025 FDD)
According to Ledgers' 2025 Franchise Disclosure Document, the total notes receivable in 2023 was $674,760. This amount is derived from two components: notes receivable - principal which was $40,000 and notes receivable - accrued interest which was $16,607, totaling $56,607. Additionally, there was an allowance for credit losses of ($15,847), resulting in a net notes receivable of $40,760. Furthermore, the notes receivable, less current portion, amounted to $634,000.
These notes receivable primarily consist of financed area representative and unit franchise agreements, with promissory notes bearing interest rates up to 12%. This indicates that Ledgers provides financing options to its franchisees and area representatives, allowing them to pay for franchise fees or other obligations over time. The notes receivable are considered assets on Ledgers' balance sheet, representing the amounts owed to the company.
It is important to note that during 2023, Ledgers restated its financial statements due to a terminated franchise agreement that was not properly written off. This resulted in the removal of a $752,118 note receivable. The restatement significantly impacted the reported notes receivable balance. Prospective franchisees should be aware of these adjustments and understand the potential for changes in financial reporting due to unforeseen circumstances or errors.
In summary, while the initial calculation of notes receivable appears straightforward, the restatement and allowance for credit losses highlight the complexities involved in managing and reporting these assets. A prospective franchisee should inquire about Ledgers' policies for managing notes receivable, including the criteria for extending credit, the procedures for monitoring and collecting payments, and the methods for estimating and accounting for potential credit losses.