How are advertising costs treated for Bevaris Alliance accounting purposes?

According to Bevaris Alliance's 2024 Franchise Disclosure Document, advertising costs are expensed as they are incurred. In 2023, Bevaris Alliance's advertising costs totaled $1,230, while in 2022, they amounted to $3,212. This means that Bevaris Alliance recognizes these expenses on its income statement in the period they occur rather than capitalizing and amortizing them over time.

For a prospective Bevaris Alliance franchisee, this accounting practice indicates that the franchisor's financial statements will reflect advertising expenses in the year they are spent. This can provide a clearer picture of the company's profitability in a given year, as the costs are not spread out over multiple periods. It also suggests that the franchisor is not investing heavily in long-term advertising campaigns that would be capitalized.

Additionally, the FDD mentions a 2% system marketing fee charged to franchisees. This fee is intended to fund the development and expansion of the Bevaris Alliance franchise system, including advertising and marketing programs. The balance of the system marketing reserve fund was $174,327 as of December 31, 2023, and $72,220 as of December 31, 2022. Franchisees should be aware of how these funds are used and how they benefit from the franchisor's marketing efforts.