What is Level 1 of the fair value hierarchy that Benjamin Franklin Plumbing applies?

According to the 2025 FDD, Benjamin Franklin Plumbing uses a fair value hierarchy to prioritize the inputs used to measure fair value, categorizing them into three levels based on the lowest level of input that is available and significant to the fair value measurement. Level 1 of this hierarchy is defined as quoted prices in active markets for identical assets or liabilities. This means that when Benjamin Franklin Plumbing assesses the fair value of its assets and liabilities, the most reliable and preferred data comes from actual, real-time prices of identical items traded in active markets.

For a prospective Benjamin Franklin Plumbing franchisee, understanding this fair value hierarchy is important for interpreting the company's financial statements. Level 1 inputs represent the most transparent and objective valuations, reducing the reliance on internal estimates or subjective assessments. This can provide a higher degree of confidence in the financial figures presented in the FDD and other financial disclosures.

In practice, the availability of Level 1 inputs depends on the nature of the assets and liabilities being valued. Common examples of assets that might be valued using Level 1 inputs include publicly traded securities or commodities with active markets. However, many of the assets and liabilities of a franchise system may require the use of Level 2 or Level 3 inputs, which involve more judgment and estimation. Franchisees should be aware of how these different levels of inputs can affect the reported financial position of Benjamin Franklin Plumbing.