What is the key characteristic of a Level 3 model assumption or input for Bombs Away?

According to the 2024 Bombs Away FDD, Level 3 inputs are unobservable. When fair values are determined using pricing models, discounted cash flows, or similar techniques, and at least one significant model assumption or input is unobservable, financial instruments are classified as Level 3.

For a prospective Bombs Away franchisee, this means that some of the financial figures reported by Bombs Away rely on estimates or assumptions that cannot be verified by objective market data. This is important to understand because these unobservable inputs have the lowest priority in the fair value hierarchy, meaning they are considered less reliable than inputs based on actual market transactions or observable data.

While the FDD provides this definition, it does not specify which particular financial instruments or inputs Bombs Away classifies as Level 3. As such, a prospective franchisee should directly ask Bombs Away for more details about these Level 3 valuations, including what specific unobservable inputs are used and how they might affect the overall financial picture of the franchise.