When did 7 Brew complete its initial breakage assessment for gift cards?
7_Brew Franchise · 2025 FDDAnswer from 2025 FDD Document
iming and uncertainty of revenues and cash flows are affected by economic factors.
Gift Card Program
The franchisees sell gift cards that are redeemable for 7 Brew® products. The Company manages the gift card program by collecting all funds from the activation of gift cards. A liability for unredeemed gift cards is included in Accounts payable and accrued expenses in the accompanying Balance Sheets.
The gift cards do not have expiration dates, and the Company does not deduct non-usage fees from unredeemed gift cards. The likelihood of redemption may be determined to be remote for certain gift cards due to long periods of inactivity resulting in the Company recognizing revenue from unredeemed gift cards, breakage revenue. The Company completed its initial breakage assessment as of December 29, 2024 by analyzing redemption patterns, utilizing historical redemption rates, to determine a portion of gift cards not expected to be redeemed. As a result of this assessment, the Company recognized breakage income of $1.5 million during the year ended December 29, 2024, which is recorded within Continual service fees, royalty fees, and other revenue on the Statements of Operations. No breakage revenue was previously recognized for the y
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 82)
What This Means (2025 FDD)
According to 7 Brew's 2025 Franchise Disclosure Document, the company completed its initial breakage assessment for gift cards on December 29, 2024. This assessment involved analyzing redemption patterns and historical redemption rates to determine the portion of gift cards not expected to be redeemed.
As a result of this assessment, 7 Brew recognized breakage income of $1.5 million during the year ended December 29, 2024. This income is recorded within continual service fees, royalty fees, and other revenue on the Statements of Operations. The FDD notes that no breakage revenue was previously recognized for the years ended December 31, 2023, or December 25, 2022, and there was no gift card liability at December 26, 2021.
For a prospective franchisee, this information is relevant because it provides insight into how 7 Brew manages its gift card program and recognizes revenue from unredeemed gift cards. The recognition of breakage income can impact the company's financial statements and overall profitability, which may be of interest to potential investors or franchisees evaluating the financial health of the company.