Under 360 Painting's financial reporting, where are the NAF advertising expenses included?
360_Painting Franchise · 2025 FDDAnswer from 2025 FDD Document
be sustained if examined by a taxing authority. The second step is to measure the tax benefit as the largest amount that is 50% likely of being realized upon settlement with a taxing authority. There were no amounts recorded as of December 31, 2024 or 2023 related to uncertain tax positions.
Advertising Costs
The Company administers national advertising funds (NAF) which are funded by the franchisees for which the associated revenue is recognized in franchise service fees on the consolidated statement of operations. The NAF pays for costs of preparing and producing various advertising and marketing materials for the franchisees. The NAF advertising expenses are recognized as incurred and are included in franchise support expenses on the consolidated statements of operations. NAF advertising expenses for the years ended December 31, 2024 and 2023 were $1,287,755 and $991,224, respectively.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 56)
What This Means (2025 FDD)
According to 360 Painting's 2025 Franchise Disclosure Document, the National Advertising Fund (NAF) advertising expenses are recognized as incurred and are included in franchise support expenses on the consolidated statements of operations. The NAF is funded by franchisees, and the associated revenue is recognized in franchise service fees on the consolidated statement of operations. The NAF is used to cover the costs of preparing and producing various advertising and marketing materials for the franchisees.
For the year ending December 31, 2024, NAF advertising expenses totaled $1,287,755, while for the year ending December 31, 2023, these expenses amounted to $991,224. In contrast, non-NAF advertising expenses are recognized as incurred and are included in franchise sales expenses on the consolidated statements of operations. For the years ending December 31, 2024 and 2023, non-NAF advertising expenses were $66,792 and $559,056, respectively.
This means that a prospective 360 Painting franchisee should understand that their contributions to the NAF are used for advertising and marketing efforts managed by the company. These expenses are reported under 'franchise support expenses,' providing transparency into how these funds are utilized. Additionally, franchisees should be aware of the distinction between NAF and non-NAF advertising expenses, as the latter are categorized under 'franchise sales expenses,' offering a clearer picture of the company's overall advertising strategy and financial reporting.