Allowance for Doubtful Accounts

6 Months Ended

Jul. 03, 2011

Accounts Receivable Additional Disclosures Abstract

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(3)       Allowance for Doubtful Accounts

Accounts Receivable, Net – We provide an allowance for uncollectible accounts on accounts receivable based on historical losses and existing economic conditions, when relevant.  We provide for a general bad debt reserve for franchise receivables due to increases in days sales outstanding and deterioration in general economic market conditions.  This general reserve is based on the aging of receivables meeting specified criteria and is adjusted each quarter based on past due receivable balances.  Additionally, we have periodically established a specific reserve on certain receivables as necessary.  Any changes to the reserve are recorded in general and administrative expenses.  The allowance for uncollectible accounts was approximately $59,000 and $80,000 at July 3,2011 and January 2,2011, respectively.  Accounts receivable are written off when they become uncollectible, and payments subsequently received on such receivables are credited to allowance for doubtful accounts. Accounts receivable balances written off have not exceeded allowances provided. We believe all accounts receivable in excess of the allowance are fully collectible.  If accounts receivable in excess of provided allowances are determined uncollectible, they are charged to expense in the period that determination is made.  Outstanding past due accounts receivable are subject to a monthly interest charge on unpaid balances which is recorded as interest income in our consolidated statements of operations. In assessing recoverability of these receivables, we make judgments regarding the financial condition of the franchisees based primarily on past and current payment trends, as well as other variables, including annual financial information, which the franchisees are required to submit to us, as well as other variances.