How does Pearce Bespoke assess the collectability of receivables?
Pearce_Bespoke Franchise · 2025 FDDAnswer from 2025 FDD Document
Accounts Receivable – The Company grants credit without collateral to a majority of its franchisees and records accounts receivable at the time when a new franchise agreement is signed or the contractual criteria for billing has been satisfied. Collectability of receivables is periodically assessed, providing the basis for the allowance for credit losses accounts and related credit loss expense. Management determined no allowance for credit losses accounts was necessary as of December 31, 2023 and 2022.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 39)
What This Means (2025 FDD)
According to Pearce Bespoke's 2025 Franchise Disclosure Document, the company grants credit without collateral to most of its franchisees. Pearce Bespoke records accounts receivable when a new franchise agreement is signed or when the contractual billing criteria are met.
To ensure accurate financial reporting, Pearce Bespoke periodically assesses the collectability of these receivables. This assessment forms the basis for establishing an allowance for credit losses and determining the related credit loss expense.
As of December 31, 2023, and 2022, Pearce Bespoke's management determined that no allowance for credit losses was necessary. This suggests that, based on their assessment, they believed all receivables were fully collectible during those periods. A prospective franchisee should inquire about the criteria and process Pearce Bespoke uses to determine the collectability of receivables and whether this assessment could change in the future, potentially impacting the franchisee's financial obligations.