What is Level 1 input according to Bft's fair value measurements?

According to Bft's 2025 Franchise Disclosure Document, Level 1 input within fair value measurements refers to unadjusted quoted prices in active markets for identical assets or liabilities. These prices must be accessible at the time the measurement is taken. This definition is part of a broader framework, ASC 820, used for measuring and disclosing fair value, which applies to financial assets and liabilities reported on a fair value basis.

This valuation hierarchy prioritizes different types of inputs used to determine fair value. Level 1 inputs are considered the most reliable because they are based on actual market transactions for the exact same asset or liability. This contrasts with Level 2 inputs, which involve similar assets or liabilities or data derived from observable market information, and Level 3 inputs, which rely on unobservable data and the company's own assumptions.

For a prospective Bft franchisee, understanding these fair value measurements might not directly impact day-to-day operations. However, it's relevant in the context of Bft's overall financial reporting and how the company values its assets. Franchisees may want to be aware of these measurements to better understand the financial health and reporting practices of Bft.

In the context of the FDD, these measurements are used by Bft to assess potential impairments to intangible assets like trademarks. For example, Bft recognized an impairment loss for the CycleBar trademark using a Level 3 measurement, which indicates a higher degree of estimation and assumption in determining the fair value. This shows how the different levels of inputs can affect the valuation and reporting of assets within the Bft franchise system.