Notes Receivable

12 Months Ended

Dec. 30, 2018

Notes Receivable

Notes Receivable

13.  Notes Receivable

Selected domestic and international franchisees have borrowed funds from the Company, principally for use in the construction and development of their restaurants. In 2018, the Company also provided certain franchisees with royalty payment plans.  We have also entered into loan agreements with certain franchisees that purchased restaurants from us or from other franchisees. Loans outstanding were approximately $28.8 million and $19.9 million on a consolidated basis as of December 30, 2018 and December 31, 2017, respectively, net of allowance for doubtful accounts.

The majority of 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. Interest income recorded on franchisee loans was approximately $750,000 in 2018, $579,000 in 2017 and $684,000 in 2016 and is reported in investment income in the accompanying Consolidated Statements of Operations.

Based on our review of certain borrowers’ economic performance and underlying collateral value, we established allowances of $3.4 million and $1.0 million as of December 30, 2018 and December 31, 2017, respectively, for potentially uncollectible notes receivable. The following summarizes changes in our notes receivable allowance for doubtful accounts (in thousands):

Balance as of December 25, 2016	$	2,759
Recovered from costs and expenses		(1,715)
Deductions, including notes written off		3
Balance as of December 31, 2017		1,047
Recovered from costs and expenses		(393)
Additions, net of notes written off		2,715
Balance as of December 30, 2018	$	3,369