What are Class A-2 Units for Benjamin Franklin Plumbing executives exchanged for?
Benjamin_Franklin_Plumbing Franchise · 2025 FDDAnswer from 2025 FDD Document
ertain stock-based and other incentive compensation with the employees. The Plan provides employees an opportunity to indirectly participate in the distribution of the future profits of the Company.
The awards issued under the 2018 Plan (known as Class B Profit Interest Units) are classified as equity awards. Compensation expense is estimated at the grant date based on an award's fair value as calculated by the Monte-Carlo simulation valuation model. Compensation expense is recognized using the graded vesting attribution method over the requisite service period of five years and is included in stock-based compensation expense on the consolidated statements of comprehensive loss. The Company made a policy election to recognize forfeitures as they occur.
The Company also provides certain executives with ownership interests in the Partnership (known as Class A-2 Units) in exchange for promissory notes and rollover equity. The promissory notes only have recourse against the employee's Class A-2 units, as such they are considered to be a stock option in accordance with GAAP. In addition, the notes have an interest rate that is based on a third party indexed rate, and therefore the stock option is classified as a liability award by the Partnership. Liability classified awards are measured at each reporting date using the intrinsic value model with the related compensation expense recognized in stock-based compensation expense in the consolidated statements of comprehensive loss. Until the stock option is deemed to have been exercised through the repayment of the notes, any distributions on these shares will be deemed compensation expense.
The Company is not the legal obligor of the Class A-2 Unit awards.
Source: Item 22 — CONTRACTS (FDD pages 87–88)
What This Means (2025 FDD)
According to the 2025 Franchise Disclosure Document, Benjamin Franklin Plumbing provides certain executives with ownership interests in a Partnership, known as Class A-2 Units. These units are exchanged for promissory notes and rollover equity. The promissory notes are only have recourse against the employee's Class A-2 units and are considered a stock option in accordance with GAAP.
The notes associated with these Class A-2 Units have an interest rate based on a third-party indexed rate, classifying the stock option as a liability award by the Partnership. These liability-classified awards are measured at each reporting date using the intrinsic value model, with the related compensation expense recognized in stock-based compensation expense within the consolidated statements of comprehensive loss. Until the stock option is exercised through repayment of the notes, any distributions on these shares are treated as compensation expense.
It is important to note that Benjamin Franklin Plumbing is not the legal obligor of the Class A-2 Unit awards. The obligation for the liability-classified award remains with the Partnership, and any stock-based compensation charges incurred are recognized as additional paid-in capital through a noncash contribution, with an offsetting charge to stock-based compensation expense. In December 2023, Binford Aggregator LP issued a new tranche of A-2 units to be provided to certain executives. As of December 31, 2024 and 2023 there were approximately 476,190 A-2 units granted and the intrinsic value of this award on the grant date was equal to the value of the award. No stock-based compensation expense was recognized in the years ended December 31, 2024 and 2023 and there were no forfeitures or exercises of these awards during the years ended December 31, 2024 and 2023. During the years ended December 31, 2024, there were no A-2 units granted.