How does the Company recognize breakage income from Moes Southwest Grill gift cards?

According to Moe's Southwest Grill's 2025 Franchise Disclosure Document, the company recognizes breakage income from gift cards in proportion to actual gift card redemptions based on historical redemption rates. Breakage income refers to the revenue recognized from gift cards that are never redeemed.

For a prospective Moe's Southwest Grill franchisee, this means that the company monitors how often gift cards are used and calculates breakage income based on these trends. This income is recognized as revenue by the company, not the franchisee. The franchisee's responsibility is to redeem the gift cards when presented by customers.

This accounting practice is common in the franchise industry, as it allows the franchisor to recognize revenue from unredeemed gift cards over time, rather than all at once. Franchisees should be aware of this practice, as it can impact the franchisor's financial performance and, potentially, the support and services they provide to franchisees.