Notes Receivable

12 Months Ended

Dec. 31, 2017

Notes Receivable

Notes Receivable

11.  Notes Receivable

Selected domestic and international franchisees have borrowed funds from the Company, principally for use in the construction and development of their restaurants. We have also entered into loan agreements with certain franchisees that purchased restaurants from us or from other franchisees. Loans outstanding were approximately $19.9 million and $13.6 million on a consolidated basis as of December 31, 2017 and December 25, 2016, respectively, net of allowance for doubtful accounts.

Notes receivable bear interest at fixed or floating rates and are generally secured by the assets of each restaurant and the ownership interests in the franchisee. The carrying amounts of the loans approximate fair value. Interest income recorded on franchisee loans was approximately $579,000 in 2017, $684,000 in 2016 and $731,000 in 2015 and is reported in investment income in the accompanying consolidated statements of income.

Based on our review of certain borrowers’ economic performance and underlying collateral value, we established allowances of $1.0 million and $2.8 million as of December 31, 2017 and December 25, 2016, respectively, for potentially uncollectible notes receivable. The following summarizes changes in our notes receivable allowance for doubtful accounts (in thousands):

Balance as of December 27, 2015	$	3,653
Recovered from costs and expenses		(250)
Deductions, including notes written off		(644)
Balance as of December 25, 2016		2,759
Recovered from costs and expenses		(1,715)
Additions, net of notes written off		3
Balance as of December 31, 2017	$	1,047