How does 360 Painting describe Level 3 inputs within its fair value hierarchy?

According to 360 Painting's 2025 Franchise Disclosure Document, Level 3 inputs within the fair value hierarchy are defined as inputs that are generally unobservable and typically reflect management's estimates of assumptions that market participants would use in pricing the asset or liability. This hierarchy is used to prioritize the inputs used to measure fair value. The categorization within the hierarchy is based upon the lowest level of input that is available and significant to the fair value measurement.

For a prospective 360 Painting franchisee, this means that certain financial valuations may rely heavily on the franchisor's own estimates and assumptions rather than concrete market data. These valuations could pertain to assets or liabilities that are difficult to price objectively. This is important to understand because it reflects a degree of subjectivity in the company's financial reporting.

It is important for potential franchisees to recognize that Level 3 inputs involve a higher degree of estimation and may be more susceptible to changes based on management's judgment. While the FDD provides this definition for transparency, franchisees may want to inquire further about the specific assets or liabilities valued using Level 3 inputs to fully understand the assumptions and potential impact on 360 Painting's financial position.