What is the relationship between Belocal and the 'affiliate' mentioned in the 'Due from affiliate' line item?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
As of June 30, 2025 and 2024, the Company had an amount of $4,217,245 and $3,998,969, respectively, due from its affiliate. Had these transactions occurred as unrelated third party transactions, the financial results may have varied significantly.
During the years ended June 30, 2025, 2024 and 2023, the Company's affiliate N2 Company provided accounting, marketing and other operating services for the Company. These costs are included in management fees in the statements of operations and were $6,624,000, $6,048,000 and $4,800,000 for the years ended June 30, 2025, 2024 and 2023, respectively.
The Company derives its sales services revenue from one customer, its affiliate, N2 Company. In the normal course of business, the Company provides credit to its affiliate and does not require collateral.
N2 Franchising, Inc., a Delaware corporation, originally formed as N2 Franchising, LLC (the "LLC"), a Delaware limited liability company on October 26, 2016, pursuant to a plan of conversion the Company converted to a Delaware corporation effective July 1, 2019 (the "Conversion"). References in these financial statement footnotes to "Company", "N2 Franchising", "we", "us" and "our" refer to N2 Franchising, Inc.
An affiliate of the Company, N2 Company, originally formed as Neighborhood Networks Publishing, Inc. ("N2 Company"), has licensed the trademarks and the proprietary system to the Company under a non-exclusive and perpetual license agreement (the "License").
During the years ended June 30, 2025, 2024 and 2023, the Company provided sales services to N2 Company. This revenue is included in sales services revenue in the statements of operations and were $82,501,921, $77,450,854 and $77,776,240 for the years ended June 30, 2025, 2024 and 2023, respectively.
Source: Item 23 — RECEIPTS (FDD pages 71–242)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, the affiliate referenced in the 'Due from affiliate' line item is N2 Company. N2 Franchising, Inc. (referred to as "the Company" in the FDD) has a significant relationship with N2 Company. As of June 30, 2025, Belocal had $4,217,245 due from its affiliate, N2 Company. In the normal course of business, Belocal provides credit to its affiliate and does not require collateral. N2 Company originally formed as Neighborhood Networks Publishing, Inc. and has licensed the trademarks and the proprietary system to the Company under a non-exclusive and perpetual license agreement.
N2 Company provides accounting, marketing, and other operating services to Belocal. The costs for these services are included in management fees, which amounted to $6,624,000 for the year ended June 30, 2025. Belocal derives its sales services revenue from N2 Company. For the year ended June 30, 2025, this revenue was $82,501,921.
This related-party relationship is significant for prospective Belocal franchisees because it indicates a strong financial and operational interdependence between Belocal and N2 Company. The FDD notes that the financial results may have varied significantly had these transactions occurred as unrelated third-party transactions. This means that the costs and revenues reported by Belocal are directly influenced by its relationship with N2 Company, which could affect the overall profitability and financial stability of the franchise system.
Prospective franchisees should carefully consider the implications of this related-party relationship and how it might impact their own franchise operations. It would be prudent to inquire about the terms of the licensing agreement, the nature of the services provided by N2 Company, and the potential risks and benefits associated with this arrangement.