Buffalo Wild Wings 2007 Annual Report Download - page 38

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BUFFALO WILD WINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 30, 2007 and December 31, 2006
(Dollar amounts in thousands, except per-share amounts)
(1) Nature of Business and Summary of Significant Accounting Policies
(a) Nature of Business
References in these financial statement footnotes to “we”, “us”, and “our” refer to the business of Buffalo Wild Wings,
Inc. and our subsidiaries. We were organized for the purpose of operating Buffalo Wild Wings® restaurants, as well as selling
Buffalo Wild Wings restaurant franchises. In exchange for the initial and continuing franchise fees received, we give
franchisees the right to use the name Buffalo Wild Wings.
At December 30, 2007, December 31, 2006, and December 25, 2005, we operated 161, 139, and 122 Company-owned
restaurants, respectively, and had 332, 290, and 248 franchised restaurants, respectively.
(b) Principles of Consolidation
The consolidated financial statements include the accounts of Buffalo Wild Wings, Inc. and its wholly owned
subsidiaries (collectively, the Company). All significant intercompany accounts and transactions have been eliminated in
consolidation.
(c) Fiscal Year
We utilize a 52- or 53-week accounting period that ends on the last Sunday in December. The fiscal years ended
December 30, 2007, and December 25, 2005, comprised 52 weeks. The fiscal year ended December 31, 2006 was a 53-week
year with the quarter ended December 31, 2006 comprising fourteen weeks. The 53rd week of fiscal 2006 contributed $5,663
in restaurant sales and $768 in royalties and fees.
(d) Restaurant Sales Concentration
As of December 30, 2007, we operated 25 Company-owned restaurants and had 61 franchised restaurants in the state of
Ohio. The Company-owned restaurants in Ohio aggregated 16.3%, 18.6%, and 22.3%, respectively, of our restaurant sales in
fiscal 2007, 2006, and 2005. We are subject to adverse trends in that state.
(e) Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments with original maturities of three months or less.
(f) Marketable Securities
Marketable securities consist of available-for-sale securities and trading securities that are carried at fair value and
held-to-maturity securities that are stated at amortized cost, which approximates market.
Available-for-sale securities are classified as current assets based upon our intent and ability to use any and all of the
securities as necessary to satisfy the operational requirements of its business. Realized gains and losses from the sale of
available-for-sale securities were not material for fiscal 2007, 2006, and 2005. Unrealized losses are charged against net
earnings when a decline in fair value is determined to be other than temporary. The available-for-sale investments carry
short-term repricing features which generally result in these investments having a value at or near par value (cost).
Trading securities are stated at fair value, with gains or losses resulting from changes in fair value recognized currently
in earnings as interest income. In 2006, we funded a deferred compensation plan using trading assets in a marketable equity
portfolio. This portfolio is held to generate returns that seek to offset changes in liabilities related to the equity market risk of
certain deferred compensation arrangements. These deferred compensation liabilities were $1,579 and $1,237 as of December
30, 2007 and December 31, 2006, respectively, and are included in accrued compensation and benefits in the accompanying
consolidated balance sheets.
(g) Accounts Receivable
Accounts receivable – franchisees represents royalty receivables from our franchisees. Accounts receivable – other
consists primarily of contractually-determined receivables for leasehold improvements, credit cards, vendor rebates, and
purchased interest on investments.