Build-A-Bear Workshop 2014 Annual Report Download - page 32

• We believe that our real estate optimization strategies drove the
remaining 30% of the overall comparable store sales increase in
2013. The real estate optimization plans included selective store
closures, primarily in North American multi-store markets, as well
as updates and remodels of select other stores. These actions
drove a 9% increase in sales per square foot in North America,
reversing a multi-year decline.
Franchise fees: We receive an initial, one-time franchise fee for each
master franchise agreement which is amortized to revenue over the
initial term of the respective franchise agreements, which extend
for periods up to 25 years and include a renewal option if certain
conditions are met. Master franchise rights are typically granted to
a franchisee for an entire country or countries. Continuing franchise
fees are based on a percentage of sales made by the franchisees’
stores and are recognized as revenue at the time of those sales.
Commercial revenue: Commercial revenue includes the company’s
transactions with other businesses, mainly through wholesale and
licensing transactions. Revenue from wholesale product sales
includes revenue from merchandise sold at stores operated by third
parties under licensing agreements. Revenue from licensing activities
is generally based on a percentage of sales made by licensees to
third parties and is recognized at the time the product is shipped
by the licensee or at the point of sale. We have historically entered
into a number of licensing arrangements whereby third parties
manufacture merchandise carrying the Build-A-Bear trademark and
sell it to other retailers.
Costs and Expenses
Cost of merchandise sold and retail gross margin: Cost of
merchandise sold includes the cost of the merchandise, including
royalties paid to licensors of third party branded merchandise;
store occupancy cost, including store depreciation and store
asset impairment charges; cost of warehousing and distribution;
packaging; stung; damages and shortages; and shipping and
handling costs incurred in shipment to customers. Retail gross margin
is defined as net retail sales less the cost of retail merchandise sold,
which excludes cost of wholesale merchandise sold.
Selling, general and administrative expense: These expenses
include store payroll and benefits, advertising, credit card fees, store
supplies and preopening expenses as well as central oce general
and administrative expenses, including costs for management
payroll, benefits, stock-based compensation, normal store closings,
travel, information systems, accounting, insurance, legal and public
relations. These expenses also include depreciation of central oce
assets as well as the amortization of intellectual property and other
assets. Certain store expenses such as store payroll and credit card
fees historically have increased or decreased proportionately with
net retail sales.
Stores
Company-owned stores: The number of Build-A-Bear Workshop
stores in the United States, Canada, Puerto Rico, the United Kingdom
and Ireland for the last three fiscal years can be summarized as
follows:
Fifty-three Weeks Ended January 3, 2015
December 28,
2013 Opened Closed
January 3,
2015
North America
Traditional 253 5(13)245
Non-traditional 10 11 (1)20
263 16 (14)265
Europe
Traditional 58 -(1)57
Non-traditional 2 - - 2
60 -(1)59
Total 323 16 (15)324
Fifty-two Weeks Ended December 28, 2013
December 29,
2012 Opened Closed
December 28,
2013
North America
Traditional 283 4(34)253
Non-traditional 8 5 (3)10
291 9(37)263
Europe
Traditional 58 1(1)58
Non-traditional 2 - - 2
60 1(1)60
Total 351 10 (38)323
Fifty-two Weeks Ended December 29, 2012
December 31,
2011 Opened Closed
December 29,
2012
North America
Traditional 287 2(6)283
Non-traditional 11 1(4) 8
298 3(10)291
Europe
Traditional 56 2 - 58
Non-traditional 2 - - 2
58 2 - 60
Total 356 5(10)351
20 BUILD-A-BEAR WORKSHOP, INC. 2014 ANNUAL REPORT