Supercuts 2011 Annual Report Download - page 96

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Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Advertising:
Advertising costs, including salon collateral material, are expensed as incurred. The following table breaks out advertising costs expensed
and included in continuing operations, and advertising costs expensed and included in discontinued operations in fiscal years 2011, 2010 and
2009:
The Company participates in cooperative advertising programs under which the vendor reimburses the Company for costs related to
advertising for its products. The Company records such reimbursements as a reduction of advertising expense when the expense is incurred.
During fiscal years 2011, 2010, and 2009, no amounts were received in excess of the Company's related expense.
Advertising Funds:
The Company has various franchising programs supporting its franchise salon concepts consisting of Supercuts, Cost Cutters, First Choice
Haircutters, Magicuts, Pro-Cuts, Beauty Supply Outlet and Hair Club. Most of the concepts maintain advertising funds that provide
comprehensive advertising and sales promotion support.
The Supercuts advertising fund is the Company's largest advertising fund. The Supercuts advertising fund is administered by a council
consisting primarily of franchisee representatives. The council has overall control of all of the fund's expenditures and operates in accordance
with terms of the franchise operating and other agreements.
Each Supercuts salon contributes 5.0 percent of service revenues to the fund (contributions for other concepts range between 1.5 and
5.0 percent). The majority of the advertising funds are spent to support media placement and local marketing activities. The remainder is
allocated for the creation of national advertising campaigns and system wide activities. None of the Supercuts advertising funds collected may be
used by the Company as reimbursement for the cost of administering the advertising fund. Advertising funds can only be used as directed by the
fund's council and are considered to be restricted.
The Company records all advertising funds as assets and liabilities within the Company's Consolidated Balance Sheet. As of June 30, 2011
and 2010, approximately $16.7 and $18.0 million, respectively, of the advertising funds' assets and liabilities were recorded within total assets
and total liabilities, respectively, in the Company's Consolidated Balance Sheet.
The Company records advertising expense in the period the company-owned salon makes contributions to the respective advertising fund.
During fiscal years 2011, 2010, and 2009 total contributions to the franchise brand advertising funds totaled $41.9, $39.8, and $39.4 million,
respectively.
92
For the Years Ended June 30,
Breakout of Advertising Costs
2011
2010
2009
Advertising costs included in
continuing operations
$
63,275
$
54,850
$
56,926
Advertising costs included in
discontinued operations
—
—
4,451
Total advertising costs
$
63,275
$
54,850
$
61,377