Baskin Robbins 2013 Annual Report Download - page 48

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the investment in our South Korea joint venture. For a reconciliation to total revenues and income before income taxes, see
note 12 to our consolidated financial statements. Revenues for all segments include only transactions with unaffiliated
customers and include no intersegment revenues. Revenues not included in segment revenues include revenue earned through
arrangements with third parties in which our brand names are used and revenue generated from online training programs for
franchisees that are not allocated to a specific segment.
Dunkin’ Donuts U.S.
Fiscal year Increase (Decrease)
2013 2012 $ %
(In thousands, except percentages)
Royalty income $ 362,342 337,170 25,172 7.5 %
Franchise fees 36,192 29,445 6,747 22.9 %
Rental income 91,918 92,049 (131) (0.1)%
Sales at company-owned restaurants 24,976 22,765 2,211 9.7 %
Other revenues 5,751 3,970 1,781 44.9 %
Total revenues $ 521,179 485,399 35,780 7.4 %
Segment profit $ 379,751 355,274 24,477 6.9 %
The increase in Dunkin’ Donuts U.S. revenues for fiscal year 2013 was primarily driven by an increase in royalty income of
$25.2 million as a result of an increase in systemwide sales, as well as increased franchise fees of $6.7 million due to additional
gross development, favorable development mix, and incremental franchise renewals. The increase in revenues was also driven
by an increase in sales at company-owned restaurants of $2.2 million driven by higher average sales volumes and the timing of
acquisitions and development of restaurants during the periods, as well as an increase in gains from refranchising transactions.
The increase in Dunkin’ Donuts U.S. segment profit for fiscal year 2013 was primarily driven by revenue growth, partially
offset by the $7.5 million third-party product volume guarantee charge and an increase in personnel costs of $2.7 million as a
result of continued investments in our Dunkin’ Donuts U.S. contiguous growth strategy.
Dunkin’ Donuts International
Fiscal year Increase (Decrease)
2013 2012 $ %
(In thousands, except percentages)
Royalty income $ 14,249 13,474 775 5.8 %
Franchise fees 3,531 1,715 1,816 105.9 %
Rental income 133 179 (46) (25.7)%
Other revenues 403 117 286 244.4 %
Total revenues $ 18,316 15,485 2,831 18.3 %
Segment profit $ 7,479 9,670 (2,191) (22.7)%
The increase in Dunkin’ Donuts International revenue for fiscal year 2013 resulted primarily from an increase in franchise fees
of $1.8 million due to income recognized in connection with the termination of development agreements in Asia and franchise
fees for openings in new international markets, and an increase in royalty income of $0.8 million driven by the increase in
systemwide sales. Dunkin’ Donuts International revenues for fiscal year 2013 also includes a $0.3 million increase in other
revenues driven by incremental transfer fee income.
The decrease in Dunkin’ Donuts International segment profit for fiscal year 2013 was primarily driven by $3.7 million in write-
downs related to our investments in the Dunkin’ Donuts Spain joint venture, as well as a decline in net income of equity
method investments of $0.9 million. For Dunkin’ Donuts International, net income of equity method investments includes an
unfavorable adjustment of $0.3 million for fiscal year 2013 and a favorable adjustment of $0.6 million for fiscal year 2012
related to differences between local accounting principles applied by our South Korea joint venture and U.S. GAAP, which
were drivers for the decline in net income of equity method investments for the segment. Losses realized from our Spain joint
venture were offset by increased net income from our South Korea joint venture. In addition to the decline in net income of
equity method investments, segment profit also declined as a result of investments in personnel, marketing, and other initiatives
to grow the Dunkin’ Donuts International business, offset by the increase in total revenues.