Jamba Juice 2014 Annual Report Download - page 65

Intangible assets subject to amortization (primarily franchise agreements, reacquired franchise rights, favorable lease intangible assets and acquired
customer relationships) are tested for impairment if changes in circumstances indicate that their carrying amounts may not be recoverable. The Company first
compares the carrying value of the asset to the asset’s estimated future undiscounted cash flows. If the estimated future cash flows are less than the carrying
value of the asset, the Company measures an impairment loss based on the asset’s estimated fair value. Intangible assets are amortized over their estimated
useful lives using a method of amortization that reflects the pattern in which the economic benefits of the intangible assets are consumed or otherwise
realized. The useful life for the franchise agreements is approximately 13.4 years. The useful life of reacquired franchise rights represents the remaining term
of the franchise agreement. The useful life of the favorable lease portfolio intangible is based on the related lease term. At December 30, 2014, the Company
recorded intangible assets of $0.8 million, net, relating to its acquisition of 26 stores in the Midwest from a former franchise partner pursuant to a Settlement
and General Release Agreement.
Jambacards — The Company, through its subsidiary, Jamba Juice Company, sells jambacards to its customers in its retail stores, through its website
and through resellers. The Company’s jambacards do not have an expiration date. An obligation is recorded at the time of either an initial load or a
subsequent reload in accrued jambacard liability on the Company’s consolidated balance sheets. The Company recognizes income from jambacards when (i)
the jambacard is redeemed by the customer or (ii) the likelihood of the jambacard being redeemed by the customer is remote (also referred to as “breakage”)
and the Company determines that it does not have a legal obligation to remit the unredeemed jambacards to the relevant jurisdictions. The Company
determines the jambacard breakage amount based upon its historical redemption patterns. When the likelihood of redemption becomes remote, the Company
recognizes breakage income. Jambacard breakage income is included in other operating, net in the consolidated statements of operations.
Self-Insurance Reserves The Company is self-insured for healthcare benefits. The estimated accruals for these liabilities are based on statistical
analyses of historical industry data as well as actual historical trends. For its workers’ compensation benefits, it is self-insured for existing and prior years’
exposures through September 30, 2008. Liabilities associated with the risks that the Company retains for workers compensation benefits are estimated in part,
by considering historical claims experience, demographic factors, severity factors, and other actuarial assumptions. The Company’s estimates use this
actuarial data in conjunction with known industry trends and Company experience.
Rent Expense — Under the provisions of certain of our leases, there are rent holidays and/or escalations in payments over the base lease term, as well as
renewal periods. The effects of rent holidays and escalations are reflected in rent costs on a straight-line basis over the expected lease term, which includes
cancelable option periods when it is deemed to be reasonably assured that the Company will exercise such option periods due to the fact that the Company
would incur an economic penalty for not doing so. The lease term commences on the date when the Company becomes legally obligated for the rent
payments which generally coincides with the time when the landlord delivers the property for the Company to develop. All rent costs recognized during
construction periods are classified as pre-opening expenses. The Company recorded liabilities for rent concessions over the remaining term of certain store
leases of refranchised stores.
Construction Allowances — The Company receives construction allowances from certain landlords, which are deferred and amortized on a straight-line
basis over the lease term as a reduction of rent expense. Construction allowances are recorded in deferred rent and other long-term liabilities.
Revenue Recognition — Revenue from Company Stores is recognized when product is sold. Revenue is presented net of any taxes collected from
customers and remitted to government entities. In February 2014, the Company initiated a point loyalty program for its customers, which allows them to earn
points based on the volume of their purchases. Under the loyalty program, a customer receives a discount on future purchases when a defined number of
points have been earned. Revenue for the points earned by customers is recognized when the points are redeemed in exchange for the discounts. The
estimated amount for points redeemable in exchange for discounts is recorded in deferred revenue and recognized when the customers redeem the points they
earned. At December 30, 2014, the amount in deferred revenue for unredeemed points under the loyalty program was $0.7 million.
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