Jack In The Box 2009 Annual Report Download - page 49

Table of Contents
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Revenue recognition — Revenue from restaurant sales are recognized when the food and beverage products are sold and are
presented net of sales taxes.
We provide purchasing, warehouse and distribution services for most of our franchise-operated restaurants. Revenue from these
services is recognized at the time of physical delivery of the inventory.
Franchise fees are recorded as revenue when we have substantially performed all of our contractual obligations. Franchise royalties
are recorded in revenues on an accrual basis. Certain franchise rents, which are contingent upon sales levels, are recognized in the period
in which the contingency is met. In addition, we recognize gains from the sale of company-operated restaurants to franchisees which are
recorded when the sales are consummated and certain other gain recognition criteria are met and are presented as a reduction of operating
costs and expenses in the accompanying consolidated statements of earnings.
The following is a summary of initial franchise fees received and gains recognized on the sale of restaurants to franchisees (dollars
in thousands):
  
Number of restaurants sold to franchisees 194 109 76
Number of new restaurants opened by franchisees 59 71 93
Initial franchise fees received $ 10,538 $ 7,303 $ 6,355
Cash proceeds from the sale of company-operated restaurants $ 94,927 $ 57,117 $ 51,256
Notes receivable(1) 21,575 27,928 —
Net assets sold (primarily property and equipment) (35,378) (16,864) (11,995)
Goodwill related to the sale of company-operated restaurants (2,482) (1,832) (1,170)
Gains on the sale of company-operated restaurants(2) $ 78,642 $ 66,349 $ 38,091
(1) Temporary financing was provided to franchisees to facilitate the closing of certain refranchising transactions.
(2) In 2009, we recognized a loss of $2.4 million relating to the anticipated sale of a lower-performing Jack in the Box company-operated
market.
Gift cards — We sell gift cards to our customers in our restaurants and through selected third parties. The gift cards sold to our
customers have no stated expiration dates and are subject to actual and/or potential escheatment rights in several of the jurisdictions in
which we operate. We recognize income from gift cards when redeemed by the customer.
While we will continue to honor all gift cards presented for payment, we may determine the likelihood of redemption to be remote for
certain card balances due to, among other things, long periods of inactivity. In these circumstances, to the extent we determine there is no
requirement for remitting balances to government agencies under unclaimed property laws, card balances may be recognized as a
reduction to selling, general and administrative expenses in the accompanying consolidated statements of earnings.
Income recognized on unredeemed gift card balances was $0.7 million and $1.0 million in fiscal 2009 and 2008, respectively. No
income from unredeemed gift cards (“breakage”) was recognized prior to fiscal 2008 due to, among other things, insufficient gift card
history necessary to estimate our potential breakage.
Pre-opening costs associated with the opening of a new restaurant consist primarily of employee training costs and are expensed as
incurred.
Restaurant closure costs — All costs associated with exit or disposal activities are recognized when they are incurred. Restaurant
closure costs, which are included in selling, general and administrative expenses, consist of future lease commitments, net of anticipated
sublease rentals, and expected ancillary costs.
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