Under what condition does Ledgers write off accounts receivable?
Ledgers Franchise · 2025 FDDAnswer from 2025 FDD Document
Royalty receivables are stated at the amount management expects to collect from balances outstanding at year-end. The Company estimates its allowance for credit losses by considering a number of factors, including the length of time accounts receivable are due, previous loss history, the customer's current ability to pay its obligation and the condition of the general economy and the industry as a whole. The Company writes off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited against credit loss expense. Management has determined their is no allowance for credit losses related to royalty receivables as of December 31, 2024, 2023, and 2022.
Source: Item 22 — CONTRACTS (FDD page 46)
What This Means (2025 FDD)
According to Ledgers' 2025 Franchise Disclosure Document, the company writes off accounts receivable when they become uncollectible. Payments that are subsequently received on these previously written-off receivables are then credited against credit loss expense.
For a prospective Ledgers franchisee, this accounting practice means that Ledgers does not carry uncollectible accounts receivable on its books. This provides a clearer picture of the company's actual financial health. It also implies that Ledgers has a system in place to identify and manage potentially uncollectible accounts, which could be beneficial for franchisees in terms of understanding how the franchisor manages its own finances.
Furthermore, the FDD states that management determined there was no allowance for credit losses related to royalty receivables as of December 31, 2024, 2023, and 2022. This suggests that Ledgers has been effective in collecting its royalty receivables during those years. Franchisees may want to inquire about the specific procedures Ledgers uses to determine when an account is deemed uncollectible to better understand the risk and management of potential credit losses.