According to Dickeys
Dickeys_Barbecue_Pit Franchise · 2024 FDDAnswer from 2024 FDD Document
s receivable and accounts payable | ¢ | _ | بے | - | ċ | 4.258.976 |
NOTE 1: ORGANIZATION
Dickey's Barbecue Restaurants, Inc. (DBRI), a wholly-owned subsidiary of Dickey's Capital Group, Inc. (the "Parent"), was incorporated in 1994 under the laws of the State of Texas. DBRI was formed for the purpose of franchising barbecue restaurants. At May 31, 2024, DBRI had 385 operating franchises (including 9 stores owned by related parties), 114 of the operating franchises were located in Texas (including 8 stores owned by related parties), with the remainder operating in approximately 39 other states and 20 international locations. DBRI's management team has successfully operated barbecue restaurants at various locations since 1941. In addition to the franchised barbecue restaurants, Virtual Brands, Inc. (VBI), a majority-owned subsidiary of DBRI, which offered virtual franchises (from a ghost kitchen venue) or from a branded restaurant. As of May 31, 2024, VBI had franchised 55 restaurants (16 of which were Big Deal Burger Restaurants, 26 of which were Wing Boss Restaurants and 13 of which were Trailer Birds Restaurants).
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of DBRI, its wholly-owned subsidiary, Spark Intelligence, Inc. and its majority-owned subsidiary, Virtual Brands, Inc., (collectively the "Company"). All significant intercompany transactions and accounts have been eliminated.
Basis of Accounting
The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The Financial Accounting Standards Board (FASB) provides authoritative guidance regarding U.S. GAAP through the Accounting Standards Codification (ASC) and related Accounting Standards Updates (ASUs).
Use of Estimates
The preparation of U.S. GAAP financial statements requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and changes therein, and disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses. Actual results could differ from those estimates. Estimates that are particularly susceptible to significant change in the near term are related to goodwill, other intangible assets and allowance for credit losses.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fair Value of Financial Instruments
The Company defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. Financial instruments included in the Company's consolidated financial statements include cash and cash equivalents, restricted cash, trade accounts receivable, other assets and trade accounts payable. Unless otherwise disclosed in the notes to the consolidated financial statements, the carrying value of financial instruments is considered to approximate fair value due to the short maturity and characteristics of those instruments.
The carrying value of capital leases approximates fair value since terms approximate those currently available for similar type instruments.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 95)
What This Means (2024 FDD)
According to Dickey's Barbecue Pit's 2024 Franchise Disclosure Document, as of May 31, 2024, Dickey's Barbecue Restaurants, Inc. (DBRI) had 385 operating franchises. Of these, 114 were located in Texas (including 8 stores owned by related parties), with the remaining franchises operating in approximately 39 other states and 20 international locations. DBRI's management team has been operating barbecue restaurants since 1941. Additionally, Virtual Brands, Inc. (VBI), a majority-owned subsidiary of DBRI, had franchised 55 virtual restaurants, including 16 Big Deal Burger Restaurants, 26 Wing Boss Restaurants, and 13 Trailer Birds Restaurants. These virtual brands operate from ghost kitchen venues or branded restaurants.
The FDD includes audited financial statements for the fiscal years ended May 31, 2022, 2023, and 2024. These statements comprise consolidated balance sheets, statements of operations, statements of stockholder's equity, and statements of cash flows for Dickey's Barbecue Restaurants, Inc. and its subsidiaries. The financial statements are prepared on the accrual basis of accounting, following accounting principles generally accepted in the United States of America (U.S. GAAP).
The franchise agreements for Dickey's Barbecue Pit generally require franchisees to pay a percentage of their gross monthly revenue to the Marketing Fund, with the percentage ranging up to 4%, depending on the contract. These funds are used for advertising and marketing purposes. The company recognizes revenue from these marketing fees once the related advertising costs are expensed and does not recognize any profit from these fees.
The FDD also addresses gift card liabilities, noting that gift card discounts are expensed at the time of sale. Gift card breakage revenue is recognized as gift cards are sold, based on an estimated redemption rate. For the year ended May 31, 2024, the estimated redemption rate was 83%, based on historical data. The gift card liability was approximately $387,000 as of May 31, 2024. Additionally, the allowance for credit losses, which represents management's estimate of potential credit losses from receivables, was approximately $11,000 as of May 31, 2024.