Baskin Robbins 2015 Annual Report Download - page 79

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-69-
The changes in franchised and company-operated points of distribution were as follows:
Fiscal year ended
December 26,
2015
December 27,
2014
December 28,
2013
Systemwide points of distribution:
Franchised points of distribution in operation—beginning of year 18,821 18,122 17,333
Franchised points of distribution—opened 1,536 1,442 1,388
Franchised points of distribution—closed (1,051)(744)(600)
Net transfers from company-operated points of distribution 211
Franchised points of distribution in operation—end of year 19,308 18,821 18,122
Company-operated points of distribution—end of year 49 41 36
Total systemwide points of distribution—end of year 19,357 18,862 18,158
(4) Advertising funds
On behalf of the Dunkin’ Donuts and Baskin-Robbins domestic advertising funds, the Company collects a percentage, which is
generally 5%, of gross retail sales from Dunkin’ Donuts and Baskin-Robbins domestic 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, prepaid expenses, payables, accrued expenses, and any cumulative surplus or deficit 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 26, 2015 and December 27, 2014, the Company had a net payable of $11.6 million and $13.8 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
items such as facilities, accounting services, information technology, data processing, product development, legal,
administrative support services, and other operating expenses, as well as share-based compensation expense for employees that
provide services directly to the advertising funds. Management fees totaled $9.7 million, $7.6 million, and $5.5 million for
fiscal years 2015, 2014, and 2013, 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 for the purpose of supplementing national and
regional advertising in certain markets of $1.7 million, $2.1 million, and $2.4 million for fiscal years 2015, 2014, and 2013,
respectively. Additionally, the Company made net contributions to the advertising funds based on retail sales of company-
operated restaurants of $1.3 million, $872 thousand, and $1.0 million for fiscal years 2015, 2014, and 2013, respectively, which
are included in company-operated restaurant expenses in the consolidated statements of operations. During fiscal years 2015,
2014, and 2013, the Company also funded advertising fund initiatives of $2.3 million, $5.2 million, and $5.9 million,
respectively, which were contributed from the gift card breakage liability included within other current liabilities in the
consolidated balance sheets (see note 2(v) and note 10).