When does Precision Door Service place notes receivable on nonaccrual status?
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 places notes receivable on nonaccrual status when payment is ninety days past due. When a note receivable is placed on nonaccrual status, Precision Door Service ceases to recognize revenue from interest on the note. This status remains until the note is no longer past due.
This policy applies to unsecured credit extended to franchise owners for unpaid franchise service fees. These notes receivable are generally collateralized by the related franchise territory rights. Interest on trade notes receivable is recorded as revenue when earned.
For a prospective franchisee, this means that if Precision Door Service extends credit to them, and they fall behind on payments by 90 days, the company will stop accruing interest revenue on that note. This policy is in place to ensure accurate financial reporting and to account for the risk of non-payment. It also incentivizes Precision Door Service to actively manage and monitor the creditworthiness of its franchisees.