What happens when Black Bear Diner gift cards are issued?
Black_Bear_Diner Franchise · 2025 FDDAnswer from 2025 FDD Document
Gift Cards: The Company's gift cards carry no dormancy, inactivity or service fees, and have no expiration date. The gift cards are sold primarily at restaurant locations and through the Company's website, and are redeemable at all restaurant locations. The Company has gift card service agreements to receive and hold the proceeds of gift card sales until a customer uses the card to purchase merchandise or services from a participating restaurant location. When a customer uses a gift card to purchase merchandise or services from a participating restaurant location, the participating restaurant location is obligated to accept the gift card as payment for its goods or services, and the Company is obligated to reimburse the participating restaurant location for the sales price of the goods or services purchased with the gift card. The Company is primarily liable to the customer for the value of the gift card until the card is redeemed. When the gift cards are issued, a liability is recorded by the Company. When the gift cards are redeemed, there is an offset of the liability account. Revenues (and related expenses) are recognized by the participating restaurant location upon exchange for goods and services. The Company recognizes revenue from gift card breakage in proportion to the pattern of related gift card redemptions.
Source: Item 23 — RECEIPT (FDD pages 56–243)
What This Means (2025 FDD)
According to Black Bear Diner's 2025 Franchise Disclosure Document, the company records a liability when gift cards are issued. These gift cards, which have no dormancy, inactivity, or service fees and no expiration date, are primarily sold at restaurant locations and through the company's website and are redeemable at all restaurant locations. Black Bear Diner has gift card service agreements to manage the proceeds from gift card sales until a customer redeems the card at a participating restaurant.
When a customer uses a gift card at a Black Bear Diner, the participating restaurant is obligated to accept it as payment. Black Bear Diner then reimburses the restaurant for the sales price of the goods or services purchased with the gift card. The company is primarily liable to the customer for the gift card's value until it is redeemed. Upon redemption, the liability account is offset, and the participating restaurant recognizes revenue and related expenses for the goods and services provided.
Black Bear Diner also recognizes revenue from gift card breakage, which refers to the value of gift cards that are never redeemed. This revenue is recognized in proportion to the pattern of related gift card redemptions. This accounting practice ensures that Black Bear Diner appropriately accounts for the financial impact of gift card sales and redemptions, affecting both the company's liabilities and revenue recognition.