What must be evaluated regarding accounting practices when auditing a Pump It Up franchise?
Pump_It_Up Franchise · 2025 FDDAnswer from 2025 FDD Document
sists the franchisees in the start-up process and offers ongoing support.
Franchises operate under Pump It Up and BounceU. Active franchises at December 31, 2024, are as follows:
| Pump It Up | BounceU | |
|---|---|---|
| Franchised Locations: | ||
| Store Count as of December 31, 2023 | 46 | 11 |
| Store Openings During 2024 | - | - |
| Store Closings During 2024 | (4) | - |
| Store Count as of December 31, 2024 | 42 | 11 |
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the operations of FB Holdings, LLC and its wholly owned subsidiaries, Pump It Up Holdings, LLC; BounceU Holdings, LLC; Fun Brands, LLC; Fun Brands Tempe, LLC; and HQ Carousels, LLC. All material intercompany accounts and transactions have been eliminated in consolidation.
Cash and Cash Equivalents
For purposes of the consolidated statements 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.
Source: Item 23 — RECEIPTS (FDD pages 60–225)
What This Means (2025 FDD)
According to Pump It Up's 2025 Franchise Disclosure Document, when preparing consolidated financial statements, management must make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements. These estimates also impact the reported amounts of revenues and expenses during the reporting period. The FDD notes that actual results could differ from these initial estimates. This is a standard accounting practice, as financial statements rely on numerous estimates, such as depreciation, amortization, and allowances for doubtful accounts.
The Pump It Up FDD also states that the consolidated financial statements include the operations of FB Holdings, LLC and its wholly owned subsidiaries, including Pump It Up Holdings, LLC. All material intercompany accounts and transactions are eliminated during consolidation. This means that any financial transactions between Pump It Up and its subsidiaries are removed to provide a clear picture of the overall financial health of the consolidated entity.
Furthermore, the FDD indicates that Pump It Up maintains allowances for credit losses and accounts receivable, which primarily consist of franchise royalty fees and receivables from franchised facilities. The allowance for doubtful accounts is determined based on management's evaluation of historical losses and the financial stability of its franchisees. As of December 31, 2023 and 2022, the allowance for estimated credit losses was approximately $172,387 and $180,801, respectively. This suggests that Pump It Up actively monitors and accounts for potential losses from franchisees who may not be able to meet their financial obligations.