When are the production costs of advertising expensed for Black Bear Diner?
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 FDD, the production costs of advertising are expensed when the advertisements are first aired or displayed. All other advertising and promotional costs are expensed in the period they are incurred. This means that Black Bear Diner recognizes the expense of creating advertisements (like TV or radio spots) at the time those ads are broadcast or shown. Other advertising costs, such as brochures or online ads, are expensed as they are used or distributed.
For a prospective Black Bear Diner franchisee, this accounting practice affects the national advertising fund (NAF), which is funded by franchisee contributions approximating 1.00% of revenue. The funds are used for national, regional, and local advertising and marketing initiatives. The company may use these funds to reimburse its own costs, including salaries and other internal costs of administering the NAF.
For the years ended December 25, 2024, and December 27, 2023, these reimbursements totaled $172,139 and $118,881, respectively. These amounts are netted within payroll and benefits expenses on the statements of income. Understanding how advertising expenses are recognized can help franchisees better interpret the financial statements related to the NAF and assess the effectiveness of advertising spending.
This accounting approach is fairly standard in the franchise industry, as it aligns the expense recognition with the period in which the advertising is expected to generate benefits. Franchisees should review the annual accounting of the Marketing Fund, which Black Bear Diner prepares, to understand how their contributions are being used and how advertising expenses are being managed.