Dunkin' Donuts 2015 Annual Report Download - page 70

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DUNKIN’ BRANDS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Description of business and organization
Dunkin’ Brands Group, Inc. (“DBGI”), together with its consolidated subsidiaries, is one of the world’s largest franchisors of
restaurants serving coffee and baked goods, as well as ice cream, within the quick service restaurant segment of the restaurant
industry. We develop, franchise, and license a system of both traditional and nontraditional quick service restaurants and, in
limited circumstances, own and operate individual locations. Through our Dunkin’ Donuts brand, we develop and franchise
restaurants featuring coffee, donuts, bagels, breakfast sandwiches, and related products. Through our Baskin-Robbins brand, we
develop and franchise restaurants featuring ice cream, frozen beverages, and related products. Additionally, we distribute
Baskin-Robbins ice cream products to Baskin-Robbins franchisees and licensees in certain international markets.
Throughout these consolidated financial statements, “Dunkin’ Brands,” “the Company,” “we,” “us,” “our,” and “management”
refer to DBGI and its consolidated subsidiaries taken as a whole.
(2) Summary of significant accounting policies
(a) Fiscal year
The Company operates and reports financial information on a 52- or 53-week year on a 13-week quarter basis with the fiscal
year ending on the last Saturday in December and fiscal quarters ending on the 13th Saturday of each quarter (or 14th Saturday
when applicable with respect to the fourth fiscal quarter). The data periods contained within fiscal years 2015, 2014, and 2013
reflect the results of operations for the 52-week periods ended December 26, 2015, December 27, 2014, and December 28,
2013, respectively.
(b) Basis of presentation and consolidation
The accompanying consolidated financial statements include the accounts of DBGI and subsidiaries and have been prepared in
accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All significant
transactions and balances between subsidiaries and affiliates have been eliminated in consolidation.
We consolidate entities in which we have a controlling financial interest, the usual condition of which is ownership of a
majority voting interest. We also consider for consolidation an entity, in which we have certain interests, where the controlling
financial interest may be achieved through arrangements that do not involve voting interests. Such an entity, known as a
variable interest entity (“VIE”), is required to be consolidated by its primary beneficiary. The primary beneficiary is the entity
that possesses the power to direct the activities of the VIE that most significantly impact its economic performance and has the
obligation to absorb losses or the right to receive benefits from the VIE that are significant to it. The principal entities in which
we possess a variable interest include franchise entities, the advertising funds (see note 4), and our equity method investees. We
do not possess any ownership interests in franchise entities, except for our investments in various entities that are accounted for
under the equity method or are otherwise consolidated. Additionally, we generally do not provide financial support to franchise
entities in a typical franchise relationship. As our franchise and license arrangements provide our franchisee and licensee
entities the power to direct the activities that most significantly impact their economic performance, we do not consider
ourselves the primary beneficiary of any such entity that might be a VIE. Based on the results of our analysis of potential VIEs,
we have not consolidated any franchise entities, with the exception of those noted below. The Company’s maximum exposure
to loss resulting from involvement with potential franchise VIEs is attributable to aged trade and notes receivable balances,
outstanding loan guarantees (see note 17(b)), and future lease payments due from franchisees (see note 11).
Noncontrolling interests included within total stockholders’ equity (deficit) in the consolidated balance sheet as of
December 26, 2015 represent interests in a franchise entity that has been deemed a variable interest entity and for which the
Company is the primary beneficiary.
The Company entered into a partnership agreement in 2012, under which it held a 51% interest in a limited partnership that
owned and operated Dunkin’ Donuts restaurants in the Dallas, Texas area. The Company possessed control of this entity and,
therefore, consolidated the results of the limited partnership. During fiscal year 2013, the Company amended the partnership
agreement with the noncontrolling owners to provide the noncontrolling owners the option in early 2017 to sell their entire
interest to the Company. As a result of the amendment, the partnership agreement contained a redemption feature that was not
redeemable at the time, but it was probable to become redeemable in the future. As such, the Company reclassified the
noncontrolling interests in fiscal year 2013 to temporary equity (between liabilities and stockholders’ equity (deficit)) in the
consolidated balance sheets. The net loss and comprehensive loss attributable to the noncontrolling interest are presented