Buffalo Wild Wings 2005 Annual Report Download - page 35

The reconciliation of the store closing reserve for the years ended
December 28, 2003, December 26, 2004, and December 25, 2005 is as follows:
As of As of
Dec. 29, 2003 Costs Dec. 28,
2002 provision incurred 2003
−−−−−−−−−− −−−−−−−−−− −−−−−−−−−− −−−−−−−−−−
Remaining lease obligation and utilities $ 164 $ 210 $ (163) $ 211
Broker fees 58 (47) −− 11
−−−−−−−−−− −−−−−−−−−− −−−−−−−−−− −−−−−−−−−−
$ 222 $ 163 $ (163) $ 222
========== ========== ========== ==========
As of As of
Dec. 28, 2004 Costs Dec. 26,
2003 provision incurred 2004
−−−−−−−−−− −−−−−−−−−− −−−−−−−−−− −−−−−−−−−−
Remaining lease obligation and utilities $ 211 $ 1 $ (76) $ 136
Broker fees 11 (11) −− −−
−−−−−−−−−− −−−−−−−−−− −−−−−−−−−− −−−−−−−−−−
$ 222 $ (10) $ (76) $ 136
========== ========== ========== ==========
As of As of
Dec. 26, 2005 Costs Dec. 25,
2004 provision incurred 2005
−−−−−−−−−− −−−−−−−−−− −−−−−−−−−− −−−−−−−−−−
Remaining lease obligation and utilities $ 136 $ −− $ (136) $ −−
Broker fees −− −− −− −−
−−−−−−−−−− −−−−−−−−−− −−−−−−−−−− −−−−−−−−−−
$ 136 $ −− $ (136) $ −−
========== ========== ========== ==========
VENDOR ALLOWANCES
Vendor allowances include allowances and other funds received from
vendors. Certain of these funds are determined based on various quantitative
contract terms. We also receive vendor allowances from certain manufacturers and
distributors calculated based upon purchases made by franchisees. Amounts that
represent a reimbursement of costs incurred, such as advertising, are recorded
as a reduction of the related expense. Amounts that represent a reduction of
inventory purchase costs are recorded as a reduction of inventoriable costs. We
record an estimate of earned vendor allowances that are calculated based upon
monthly purchases. We generally receive payment from vendors approximately 30
days from the end of a month for that month's purchases. During fiscal 2003,
2004, and 2005, vendor allowances were recorded as a reduction in inventoriable
costs, and cost of sales was reduced by $2.3 million, $3.9 million, and $4.0
million, respectively.
REVENUE RECOGNITION −− FRANCHISE OPERATIONS
Our franchise agreements have terms ranging from 10 to 20 years. These
agreements also convey extension terms of five or 10 years depending on contract
terms and if certain conditions are met. We provide training, preopening
assistance and restaurant operating assistance in exchange for area development
fees, franchise fees and royalties of 5% of the franchised restaurant's sales.
Franchise fee revenue from individual franchise sales is recognized upon the
opening of the restaurant when all our material obligations and initial services
to be provided by us have been performed. Area development fees are dependent
upon the number of restaurants granted in the agreement as are our obligations
under the area development agreement. Consequently, as our obligations are met,
area development fees are recognized in relation to the expenses incurred with
the opening of each new restaurant and any royalty free periods. Royalties are
accrued as earned and are calculated each period based on reported franchisees'
sales.
SELF−INSURANCE LIABILITY
We are self−insured for a significant portion of our risks and associated
liabilities with respect to workers' compensation, general liability, and
employee health benefits. The accrued liabilities associated with these programs
are based on our estimate of the ultimate costs to settle known claims as well
as claims that may have arisen but have not yet been reported to us as of the
balance sheet date. Our estimated liabilities are not discounted and are based
on information provided by our insurance brokers and insurers, combined with our
judgments regarding a number of assumptions and factors, including the frequency
and severity of claims, and claims development history. The company maintains
stop−loss coverage with third party insurers to limit its total exposure for
each of these programs. Significant judgment is required to estimate claims
incurred but not reported as parties have yet to assert such claims. If actual
claims trends, including the severity or frequency of claims, differ from our
estimates, our financial results could be impacted.
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