When does Precision Door Service cease to recognize revenue from interest on a note?
Precision_Door_Service Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company periodically extends credit to entities for the purchase of franchises. These entities are typically controlled by individuals who operate their businesses as an owner/manager. Generally, the notes receivable are collateralized by the related franchise territory rights. The Company also extends unsecured credit to its franchise owners for unpaid franchise service fees. The Company places notes receivable on nonaccrual status when payment is ninety days past due, and ceases to recognize revenue from interest on the note until such time as the note is no longer past due. Interest on trade notes receivable is recorded as revenue when earned. Each entity's ability to perform is dependent upon the economic condition of the business. The Company maintains ongoing credit evaluations of its franchise owners.
Source: Item 21 — Financial Statements (FDD page 91)
What This Means (2025 FDD)
According to Precision Door Service's 2025 Franchise Disclosure Document, the company extends credit to entities for franchise purchases, often managed by owner/managers, with notes receivable typically secured by franchise territory rights. They also provide unsecured credit to franchisees for unpaid service fees.
Precision Door Service stops recognizing revenue from interest on a note when the payment is 90 days past due. At that point, the notes receivable are placed on nonaccrual status. Interest revenue recognition only resumes once the note is current again.
This policy means that Precision Door Service takes a conservative approach to revenue recognition, only recognizing interest income when it is reasonably assured of collection. For a franchisee, this indicates that Precision Door Service is diligent in managing its receivables and transparent in its financial reporting. Franchisees should be aware that if they receive credit from Precision Door Service, being late on payments by more than 90 days will have accounting implications for the franchisor.