What information does Monicals Pizza evaluate when determining its loss rates?
Monicals_Pizza Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company utilizes the loss rate method in determining its lifetime expected credit losses on its receivables. This method is used for calculating an estimate of losses based primarily on the Company's historical loss experience. In determining its loss rates, the Company evaluates information related to its historical losses, adjusted for current conditions and further adjusted for the period of time that can be reasonably forecasted. Qualitative and quantitative adjustments related to current conditions and the reasonable and supportable forecast period consider all the following: past due receivables, the customer creditworthiness, changes in the terms of receivables, effect of other external forces such as competition and legal and regulatory requirements on the level of estimated credit losses in the existing receivables. For receivables that are not expected to be collected within the normal business cycle, the Company considers current and forecasted direction of the economic and business environment. Such forecasted information includes, but is not limited to, gross domestic product (GDP) growth, unemployment rates and interest rates.
No allowance for credit losses was necessary at December 31, 2024 and 2023.
Source: Item 23 — RECEIPTS (FDD pages 46–257)
What This Means (2025 FDD)
According to Monicals Pizza's 2025 Franchise Disclosure Document, the company uses the loss rate method to determine lifetime expected credit losses on its receivables. This calculation estimates losses based on the company's historical loss experience.
To determine loss rates, Monicals Pizza evaluates information related to its historical losses, adjusting for current conditions and reasonably forecasted periods. These adjustments consider both qualitative and quantitative factors. Qualitative and quantitative adjustments related to current conditions and the reasonable and supportable forecast period consider all the following: past due receivables, the customer creditworthiness, changes in the terms of receivables, effect of other external forces such as competition and legal and regulatory requirements on the level of estimated credit losses in the existing receivables.
For receivables not expected to be collected within the normal business cycle, Monicals Pizza considers the current and forecasted direction of the economic and business environment. This includes, but is not limited to, gross domestic product (GDP) growth, unemployment rates, and interest rates. It is important to note that as of December 31, 2024 and 2023, no allowance for credit losses was deemed necessary.