What does accounts receivable primarily consist of for Pump It Up?
Pump_It_Up Franchise · 2025 FDDAnswer from 2025 FDD Document
ements of cash flows, the Company considers all highly liquid debt instruments purchased with original maturities of 90 days or less to be cash equivalents.
Concentrations and Credit Risk
The Company maintains checking and savings accounts with quality financial institutions. At times, cash balances may exceed the amount insured by the Federal Deposit Insurance Corporation.
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Allowances for Credit Losses and Accounts Receivable
Accounts receivable consists primarily of franchise royalty fees and receivables from franchised facilities. An allowance for doubtful accounts is determined based on management's evaluation of historical losses and the financial stability of its franchisees.
The Company records accounts receivable and contract assets at their face amounts less an allowance for credit losses. The allowance represents an estimate of expected credit losses based upon a specific review of al
Source: Item 23 — RECEIPTS (FDD pages 60–225)
What This Means (2025 FDD)
According to Pump It Up's 2025 Franchise Disclosure Document, accounts receivable primarily consists of franchise royalty fees and receivables from franchised facilities. This means that the accounts receivable balance mainly reflects the money owed to Pump It Up by its franchisees for royalty payments and other charges related to the operation of their franchised locations.
The document also states that Pump It Up records accounts receivable and contract assets at their face amounts, minus an allowance for credit losses. This allowance is an estimate of potential uncollectible amounts, determined through a review of outstanding invoices, historical data, and economic conditions. For 2024, the allowance for estimated credit losses was approximately $26,727, and for 2023, it was $172,387.
For a prospective franchisee, this indicates that Pump It Up actively monitors and manages its receivables from franchisees. The allowance for credit losses suggests that Pump It Up acknowledges the risk of non-payment by franchisees and sets aside reserves to cover potential losses. Franchisees should ensure they understand the royalty payment terms and the potential consequences of late or non-payment, as this directly impacts Pump It Up's financial stability and its relationship with its franchisees.