How are non-NAF advertising expenses recognized by 360 Painting in the consolidated statements of operations?

According to 360 Painting's 2025 Franchise Disclosure Document, non-NAF advertising expenses are recognized as incurred and are included in franchise sales expenses within the consolidated statements of operations. This means that when 360 Painting spends money on advertising that is not funded through the National Advertising Fund (NAF), the expense is recorded at the time it occurs and is categorized under franchise sales expenses in their financial statements.

For a prospective franchisee, this is relevant because it provides insight into how 360 Painting accounts for different types of advertising expenditures. The FDD specifies that advertising funded by franchisees through the NAF is treated differently, being recognized as franchise support expenses. Understanding this distinction can help a franchisee better interpret 360 Painting's financial statements and understand where advertising dollars are being allocated.

Specifically, the 2025 FDD notes that non-NAF advertising expenses for the years ended December 31, 2024 and 2023 were $66,792 and $559,056, respectively. This information allows potential franchisees to see the magnitude of non-NAF advertising expenses and how they have varied over recent years. It's important to note that these figures reflect expenses incurred by the franchisor, not necessarily advertising expenditures at the local franchisee level.

In summary, 360 Painting's accounting treatment of non-NAF advertising expenses provides transparency into their financial operations, allowing potential franchisees to assess how the company invests in advertising outside of the franchisee-funded NAF. This can be a useful factor in evaluating the overall financial health and marketing strategies of the 360 Painting franchise system.