• Filing Date: 2019-07-15
  • Form Type: 10-Q
  • Description: Quarterly report
v3.19.2
Note 12 - Revenue from Contracts with Customers
3 Months Ended
May 31, 2019
Notes to Financial Statements  
Revenue from Contract with Customer [Text Block]
NOTE
12
– REVENUE FROM CONTRACTS WITH CUSTOMERS.
 
Effective
March 1, 2018,
the Company adopted ASC
606.
ASC
606
provides that revenues are to be recognized when control of promised goods or services is transferred to a customer in an amount that reflects the consideration expected to be received for those goods or services. This new standard does
not
impact the Company's recognition of revenue from sales of confectionary items to its franchisees and others, or in its Company-owned stores as those sales are recognized at the time of the underlying sale and are presented net of sales taxes and discounts. The standard also does
not
change the recognition of royalties and marketing fees from franchised or licensed locations, which are based on a percent of sales and recognized at the time the sales occur. The standard does change the timing in which the Company recognizes initial fees from franchisees and licensees for new franchise locations and renewals that affect the term of the franchise agreement.
 
Initial Franchise Fees, License Fees, Transfer Fees
and
Renewal Fees
 
The Company's policy for recognizing initial franchise and renewal fees through
February 28, 2018,
was to recognize initial franchise fees upon new store openings and renewals that impact the term of the franchise agreement upon renewal. In accordance with the new guidance, the initial franchise services are
not
distinct from the continuing rights or services offered during the term of the franchise agreement, and will be treated as a single performance obligation. Beginning
March 1, 2018,
initial franchise fees are being recognized as the Company satisfies the performance obligation over the term of the franchise agreement, which is generally
10
-
15
years.
 
Gift Cards
 
The Company’s franchisees sell gift cards which do
not
have either expiration dates, or non-usage fees. The proceeds from the sale of gift cards by the franchisees are accumulated by the Company and paid out to the franchisees upon customer redemption. The Company has historically accumulated gift card liabilities and has
not
recognized breakage associated with the gift card liability. The adoption of ASC
606
requires the use of the “proportionate” method for recognizing breakage, which the Company has
not
historically utilized. Upon adoption of ASC
606
the Company began recognizing breakage from gift cards when the gift card is redeemed by the customer or the Company determines the likelihood of the gift card being redeemed by the customer is remote (“gift card breakage”). The determination of the gift card breakage rate is based upon Company-specific historical redemption patterns.
 
On
May 31, 2019,
annual revenue expected to be recognized in the future, related to performance obligations that are
not
yet fully satisfied, are estimated to be the following:
 
FYE 20
  $
186,880
 
FYE 21
   
199,216
 
FYE 22
   
186,117
 
FYE 23
   
171,982
 
FYE 24
   
133,064
 
Thereafter
   
381,932
 
Total
  $
1,259,191