According to My Salon Suite's 2025 Franchise Disclosure Document, the company manages potential credit losses related to franchisee royalties through ongoing evaluations of the franchisees' financial condition and by maintaining allowances for potential credit losses. The FDD states that financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of accounts and notes receivable related to royalties owed by franchisees. However, the credit risks are limited due to the large number of franchisees.

My Salon Suite's accounting policies, as described in the FDD, state that accounts receivable consist primarily of royalty billings to franchisees, which are due within 30 days. These receivables are stated net of an allowance for credit losses. The allowance is estimated based on historical collectivity, aging of receivables, and other factors such as franchisee performance or circumstances that may impact the Company's ability to collect against those receivables. Accounts receivables are written off through the allowance account when it is determined the receivable will not be collected. Accounts receivable may also be converted to notes receivable due from franchisees at the discretion of the Company.

For a prospective franchisee, this means that My Salon Suite actively monitors the financial health of its franchisees and sets aside funds to cover potential losses from unpaid royalties. This proactive approach can provide some assurance that the franchisor is financially stable and has a system in place to manage credit risks associated with franchisee payments. Franchisees should ensure they understand the terms of royalty payments and the potential consequences of late or non-payment, as well as My Salon Suite's criteria for determining creditworthiness and setting allowances for credit losses.