What were the capitalized software development costs for 360 Painting in 2023?
360_Painting Franchise · 2025 FDDAnswer from 2025 FDD Document
tributions to Members | (750,000) | - | (750,000) | | Balances at December 31, 2023 | $ (3,765,800) $ | (1,419,519) $ | (5,185,319) | | Net loss | - | (687,795) | (687,795) | | Balances at December 31, 2024 | $ (3,765,800) $ | (2,107,314) $ | (5,873,114) | | | 2024 | 2023 | |----------------------------------------------------------------|-----------------------|-------------| | | | | | Cash flows from operating activities | | | | Net loss | $ (687,795) $ | (733,879) | | Adjustments to reconcile net income to net cash | | | | provided by (used in) operating activities | | | | Depreciation and amortization | 1,983,683 | 1,804,818 | | Amortization of deferred loan costs | 91,061 | 79,207 | | Changes in assets and liabilities | | | | Accounts receivable | (380,320) | (661,073) | | Prepaid expenses and other current assets | (1,179,793) | (31,950) | | Other assets | (791,295) | (1,564,311) | | Accounts payable | (1,138) | 243,259 | | Accrued and other liabilities | (3,018) | 209,310 | | Deferred revenue | 181,384 | 311,391 | | Lease liability | (125,948) | (102,966) | | Other long-term liabilities | 1,066,172 | 1,908,039 | | Net cash provided by operating activities | 152,993 | 1,461,845 | | Cash flows from investing activities | | | | Business acquisitions, net of cash acquired | - | (5,979,862) | | Purchases of property and equipment | (81,518) | (117,758) | | Capitalized software development costs | (287,279) | (405,933) | | Net cash used in investing activities | (368,797) | (6,503,553) | | Cash flows from financing activities | | | | Member distributions | - | (750,000) | | Borrowings from long-term debt, net of deferred financing cost | 1,200,000 | 6,778,500 | | Repayments of long-term debt | (763,250) | (1,164,875) | |
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 56)
What This Means (2025 FDD)
According to 360 Painting's 2025 Franchise Disclosure Document, the capitalized software development costs for the company in 2023 were $405,933. This figure represents the investment 360 Painting made in developing its internal software platforms during that year. These costs are considered an investment in the company's infrastructure and are expected to provide long-term benefits.
Capitalized software development costs typically include expenses related to personnel, third-party contractors, and any significant upgrades or enhancements to the software platforms. These costs are capitalized when the preliminary project stage is completed and the technological feasibility is established, following specific accounting standards (FASB ASC 350-40). This means that 360 Painting believes the software development will lead to future economic benefits.
For a prospective franchisee, this indicates that 360 Painting is investing in technology to support its operations. The fact that these costs are capitalized suggests that the company views these software platforms as valuable assets with a useful life of one to two years, over which the costs are amortized. This investment could lead to more efficient operations and better support for franchisees. However, franchisees should be aware that technology investments can carry risks, such as the need for ongoing maintenance and upgrades.