Einstein Bros 2011 Annual Report Download - page 50

Form 10-K
http://www.sec.gov/Archives/edgar/data/949373/000119312512092597/d260635d10k.htm[9/11/2014 10:08:30 AM]
Deferred franchise and license revenue, which is included in other liabilities on the consolidated balance sheet, are summarized as follows:
December 28,
2010
January 3,
2012
(in thousands)
Deferred franchise and license revenue—current $ 279 $ 386
Deferred franchise and license revenue—long-term 600 663
Deferred franchise and license revenue $ 879 $ 1,049
Gift Cards – Proceeds from the sale of gift cards are recorded as deferred revenue within accrued expenses, and recognized as income when
redeemed by the holder. There are no expiration dates on the Company’ s gift cards and the Company does not charge any service fees that would
result in a decrease to a customer’ s available balance.
While the Company will continue to honor all gift cards presented for payment, it may determine the likelihood of redemption to be remote
for certain gift card balances due to, among other things, long periods of inactivity. In these circumstances, to the extent the Company determines
there is no requirement for remitting balances to government agencies under unclaimed property laws, outstanding gift card balances may then be
recognized as breakage in the consolidated statements of operations as a component of company-owned restaurant sales revenue.
Income from gift card breakage was $0.2 million for each of the fiscal years ended 2009, 2010 and 2011. For fiscal year 2010, the Company
also recognized $0.4 million in revenue related to gift certificate breakage from a gift certificate program that no longer existed. While these gift
certificates will continue to be honored, the Company has determined the likelihood to be remote for redemption of these gift certificates due to
their age and the fact that the program is no longer in place.
Preopening Costs
Preopening costs, including rent, wages, food and other restaurant operating costs, are expensed as incurred prior to a restaurant opening for
business.
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Table of Contents
EINSTEIN NOAH RESTAURANT GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Advertising Costs
The Company expenses advertising costs as incurred except for expenses related to the development and production of a major commercial or
media campaign which are charged to income during the period in which the advertisement is first presented by the media. Advertising costs were
$4.6 million, $9.9 million and $9.9 million for fiscal years 2009, 2010 and 2011, respectively, and are included in company-owned restaurant costs
in the consolidated statements of operations. The Company had $0.2 million and $0.6 million of prepaid advertising expenses as of December 28,
2010 and January 3, 2012, respectively, which are included as a component of prepaid expenses on the consolidated balance sheet.
Leases and Deferred Rent
The Company leases all of its restaurant properties under operating leases. The Company also has equipment leases that qualify as either an
operating lease or capital lease.
For a lease that contains rent escalations, the Company records the total rent payable during the lease term on a straight-line basis over the
term of the lease and records the difference between rent paid and the straight-line rent expense as deferred rent payable. Incentive payments
received from landlords are recorded as an offset to deferred rent payable and are amortized on a straight-line basis over the lease term as a
reduction of rent. As of December 28, 2010 and January 3, 2012, the Company had $5.6 million and $5.7 million, respectively, of deferred rent
payable, net of landlord incentives, recorded as a component of other liabilities on the consolidated balance sheet.
Net Income per Common Share
The Company computes basic net income per common share by dividing the net income available to common stockholders for the period by
the weighted-average number of shares of common stock outstanding during the period.
Diluted net income per share is computed by dividing the net income available to common stockholders for the period by the weighted-
average number of shares of common stock and potential common stock equivalents outstanding during the period using the treasury stock method.
Potential common stock equivalents include incremental shares of common stock issuable upon the exercise of stock options and warrants.
Potential common stock equivalents are excluded from the computation of diluted net income per share when their effect is anti-dilutive.