What was the allowance for estimated credit losses for Pump It Up at December 31, 2024?
Pump_It_Up Franchise · 2025 FDDAnswer from 2025 FDD Document
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, the allowance for estimated credit losses was approximately $26,727 as of December 31, 2024. This allowance is an accounting measure to account for potential uncollectible accounts receivable, primarily from franchise royalty fees and receivables from franchised facilities. The allowance for estimated credit losses was approximately $172,387 at December 31, 2023.
Pump It Up determines this allowance based on management's evaluation of historical losses and the financial stability of its franchisees. They review outstanding invoices and provide differing rates based on the receivable's age, historical experience, and current and expected future economic conditions. When collection efforts are exhausted without success, Pump It Up writes off the receivable and charges it against the recorded allowance.
For a prospective franchisee, this indicates that Pump It Up actively manages its credit risk associated with franchisee payments. The allowance for credit losses can fluctuate year to year, reflecting changes in the financial health of franchisees and the overall economic outlook. A lower allowance, as seen in 2024 compared to 2023, could suggest improved financial stability among franchisees or a change in the methodology used to estimate potential losses.