What is the Manager's obligation related to the MAP fund for Precision Door Service franchises?
Precision_Door_Service Franchise · 2025 FDDAnswer from 2025 FDD Document
the sales occur. Sales-based royalties are variable consideration related to our performance obligations to the franchise owners to maintain the intellectual property being licensed.
The right to collect marketing, advertising, and promotional ("MAP") fees and the obligation to maintain the MAP fund is assigned to the Manager by each SPV Franchisor, and the performance obligation and fulfillment thereof resides with the Manager. The Manager's obligation related to these funds is to administer the MAP fund, keep unused MAP fees in segregated bank accounts and use MAP fees for certain activities related to the marketing and promotion of the individual businesses. We have determined we act as the principal in the transaction related to the MAP fund contributions and expenditures. MAP fund contributions and expenditures are reported on a gross basis in the accompanying Combined Statements of Operations and Comprehensive Income. As noted above, we have concluded the advertising services provided to franchise owners are highly interrelated with the franchise rights and not a distinct performance obligation;
Source: Item 21 — Financial Statements (FDD page 91)
What This Means (2025 FDD)
According to the 2025 Precision Door Service Franchise Disclosure Document, the Manager has specific obligations related to the Marketing, Advertising, and Promotional (MAP) fund. The Manager is assigned the responsibility to collect MAP fees and maintain the MAP fund by each SPV Franchisor. The performance obligation and its fulfillment are the responsibility of the Manager.
The Manager's primary obligation is to administer the MAP fund. This includes keeping any unused MAP fees in segregated bank accounts. These funds must then be used for specific activities related to the marketing and promotion of individual Precision Door Service businesses.
Precision Door Service considers itself the principal in transactions related to MAP fund contributions and expenditures. As such, MAP fund contributions and expenditures are reported on a gross basis in the Combined Statements of Operations and Comprehensive Income. The advertising services provided to franchise owners are considered highly interrelated with the franchise rights and not a distinct performance obligation. Therefore, revenues from MAP fund fees are recognized as advertising and promotion fund revenue when the related sales occur, based on the sales-based royalty exception within ASC 606, Revenue from contracts with customers.
For a prospective franchisee, this means that a portion of their ongoing fees will be allocated to a MAP fund, which is managed by Precision Door Service. These funds are to be used specifically for marketing and promotional activities to benefit the franchise system. The franchisee should ensure they understand how these funds are being used and that they are satisfied with the level of transparency and accountability in the management of the MAP fund.