Where is the revenue from redeemed Big Apple Bagels gift cards reported?
Big_Apple_Bagels Franchise · 2025 FDDAnswer from 2025 FDD Document
Revenue from gift cards is recognized upon redemption in exchange for product and reported within franchisee store revenue and the royalty and marketing fees are paid and shown in the Condensed Consolidated Statements of Income. Until redemption, outstanding customer balances are recorded as a liability. An obligation is recorded at the time of sale of the gift card and it is included in accrued expenses on the Company's Condensed Consolidated Balance Sheets.
The liability is reduced when the gift cards are redeemed by a franchise. Although there are no expiration dates for our gift cards, based on our analysis of historical gift card redemption patterns, we can reasonably estimate the amount of gift cards for which redemption is remote, which is referred to as "breakage." The Company recognizes gift card breakage proportional to actual gift card redemptions on a quarterly basis and the corresponding revenue is included in licensing fees and other revenue.
Source: Item 23 — RECEIPTS (FDD pages 87–319)
What This Means (2025 FDD)
According to Big Apple Bagels' 2025 Franchise Disclosure Document, revenue from gift cards is recognized when the gift card is redeemed for products. This revenue is reported within franchisee store revenue. The royalty and marketing fees associated with these redeemed gift cards are then paid and shown in the Condensed Consolidated Statements of Income.
Outstanding customer balances for unredeemed gift cards are recorded as a liability on Big Apple Bagels' Condensed Consolidated Balance Sheets until the gift cards are used. This liability is reduced when a franchise redeems the gift cards.
Big Apple Bagels also estimates the amount of gift cards for which redemption is unlikely, referred to as "breakage", even though the gift cards do not have expiration dates. The company recognizes gift card breakage proportional to actual gift card redemptions on a quarterly basis, and this revenue is included in licensing fees and other revenue. The determination of the breakage rate involves significant judgment and estimates, which are reassessed each quarter.
In the provided financial table, 'Gift card revenue' is listed under 'Revenue recognized over time'. For the fiscal year ending November 30, 2024, this revenue was $3,938; for the year ending November 30, 2023, it was $21,129; and for the year ending November 30, 2022, it was $4,665.