Baskin Robbins 2012 Annual Report Download - page 74

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(z) Subsequent events
Subsequent events have been evaluated up through the date that these consolidated financial statements were filed.
(3) Franchise fees and royalty income
Franchise fees and royalty income consisted of the following (in thousands):
Fiscal year ended
December 29,
2012
December 31,
2011
December 25,
2010
Royalty income $ 385,713 363,458 332,770
Initial franchise fees, including renewal income 33,227 35,016 27,157
Total franchise fees and royalty income $ 418,940 398,474 359,927
The changes in franchised and company-owned points of distribution were as follows:
Fiscal year ended
December 29,
2012
December 31,
2011
December 25,
2010
Systemwide points of distribution:
Franchised points of distribution in operation—beginning of year 16,763 16,162 15,375
Franchises opened 1,283 1,335 1,618
Franchises closed (621)(735)(815)
Net transfers from (to) company-owned points of distribution (1)1
(16)
Franchised points of distribution in operation—end of year 17,424 16,763 16,162
Company-owned points of distribution—end of year 35 31 31
Total systemwide points of distribution—end of year 17,459 16,794 16,193
(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 29, 2012 and December 31, 2011, the Company had a net payable of $13.7 million and $19.5 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 $5.6 million, $5.7 million, and $5.6 million for fiscal years
2012, 2011, and 2010, respectively. Such management fees are included in the consolidated statements of operations as a
reduction in general and administrative expenses, net.
The Company made discretionary contributions to certain advertising funds, which amounted to $863 thousand, $2.0 million,
and $1.2 million for fiscal years 2012, 2011, and 2010, respectively, for the purpose of supplementing national and regional