Baskin Robbins 2011 Annual Report Download - page 91

(4) Advertising funds
On behalf of certain Dunkin’ Donuts and Baskin-Robbins advertising funds, the Company collects a percentage,
which is generally 5% of gross retail sales from Dunkin’ Donuts and Baskin-Robbins franchisees, to be used for
various forms of advertising for each brand. In most of our international markets, franchisees manage their own
advertising expenditures, which are not included in the advertising fund results.
The Company administers and directs the development of all advertising and promotion programs in the
advertising funds for which it collects advertising fees, in accordance with the provisions of our franchise
agreements. The Company acts as, in substance, an agent with regard to these advertising contributions. We
consolidate and report all assets and liabilities held by these advertising funds as restricted assets of advertising
funds and liabilities of advertising funds within current assets and current liabilities, respectively, in the
consolidated balance sheets. The assets and liabilities held by these advertising funds consist primarily of
receivables, accrued expenses, and other liabilities related specifically to the advertising funds. The revenues,
expenses, and cash flows of the advertising funds are not included in the Company’s consolidated statements of
operations or consolidated statements of cash flows because the Company does not have complete discretion over
the usage of the funds. Contributions to these advertising funds are restricted to advertising, product
development, public relations, merchandising, and administrative expenses and programs to increase sales and
further enhance the public reputation of each of the brands.
At December 31, 2011 and December 25, 2010, the Company had a net payable of $19.5 million and
$23.1 million, respectively, to the various advertising funds.
To cover administrative expenses of the advertising funds, the Company charges each advertising fund a
management fee for such items as rent, accounting services, information technology, data processing, product
development, legal, administrative support services, and other operating expenses, which amounted to $5.7
million, $5.6 million, and $6.2 million for fiscal years 2011, 2010, and 2009, respectively. Such management
fees are included in the consolidated statements of operations as a reduction in general and administrative
expenses, net.
The Company also made discretionary contributions to certain advertising funds, which amounted to $2.0
million, $1.2 million, and $1.2 million for fiscal years 2011, 2010, and 2009, respectively, for the purpose of
supplementing national and regional advertising in certain markets.
(5) Property and equipment
Property and equipment at December 31, 2011 and December 25, 2010 consisted of the following (in thousands):
December 31,
2011
December 25,
2010
Land ...................................... $ 30,706 30,485
Buildings .................................. 43,380 40,093
Leasehold improvements ...................... 161,167 160,369
Store, production, and other equipment ........... 50,105 49,072
Construction in progress ...................... 3,543 3,917
288,901 283,936
Accumulated depreciation and amortization ....... (103,541) (90,663)
$ 185,360 193,273
The Company recognized impairment charges on leasehold improvements, typically due to termination of the
underlying lease agreement, and other corporately-held assets of $1.4 million, $4.8 million, and $6.8 million
during fiscal years 2011, 2010, and 2009, respectively, which are included in impairment charges in the
consolidated statements of operations.
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