How are franchisee advertising contributions treated in Black Bear Diner's financial statements?
Black_Bear_Diner Franchise · 2025 FDDAnswer from 2025 FDD Document
ovides additional information about the Companyowned and franchised restaurants operating as of December 25, 2024 and December 27, 2023:
| Cash flows from investing activities: | | | |---|---|---| | ( 168,891) | ( 296,015) | | | Purchases of property and equipment | | | | Net cash used in investing activities | ( 168,891) | ( 296,015) | The Company-owned restaurants are operated by Bear Tracks Holdings LLC (BTH), an entity under common control with the Company. The Company and BTH are owned by BBD Opco LLC (Parent). BBD Opco LLC is owned by BBD Intermediate Holdco, LLC (Intermediate) and for which Intermediate is ultimately owned by BBD Holdco LLC (Holdco).
The Company also operates a national advertising fund (NAF) which administers national, regional, and local advertising and marketing initiatives for the brand. The Company receives funds from Black Bear Diner branded restaurants approximating 1.00% of revenue. The Company physically segregates these funds to ensure that the funds are utilized specifically for advertising and other brand
Source: Item 23 — RECEIPT (FDD pages 56–243)
What This Means (2025 FDD)
According to the 2025 Black Bear Diner Franchise Disclosure Document, Black Bear Diner operates a national advertising fund (NAF) that manages advertising and marketing initiatives at the national, regional, and local levels. Black Bear Diner receives funds approximating 1.00% of revenue from its branded restaurants. These funds are kept separate to ensure they are used specifically for advertising and brand development, as defined in the franchise agreements.
From time to time, Black Bear Diner uses franchisee contributions to cover its costs of administering the NAF, including salaries and other internal expenses. For the years ending December 25, 2024, and December 27, 2023, these reimbursements totaled $172,139 and $118,881, respectively. These amounts are then netted within payroll and benefits expenses on the statements of income.
The production costs for advertisements are expensed when the ads are first broadcast or displayed. All other advertising and promotional costs are expensed during the period they are incurred. This means that the costs are recognized as expenses in the accounting period when the advertising runs or the promotion takes place, aligning the expense with the related benefit.