What was the allowance for unredeemed Monicals Pizza gift cards as of December 31, 2023?
Monicals_Pizza Franchise · 2025 FDDAnswer from 2025 FDD Document
ognition requirements to all leases with an original term of 12 months or less, for which the Company is not likely to exercise a renewal option or purchase the asset at the end of the lease; rather, short term leases will continue to be recorded on a straight-line basis over the lease term. Further, the Company has elected the policy not to separate lease and nonlease components for all asset classes.
Right-of-use assets are assessed for impairment in accordance with the Company's long-lived asset policy. The Company reassesses lease classification and remeasures right-of-use assets and lease liabilities when a lease is modified and that modification is not accounted for as a separate new lease or upon certain other events that require reassessment.
Additional required disclosures for Topic 842 are contained in Note 8.
GIFT CARDS REDEEMABLE, NET:
The Company administers a gift card program. Unredeemed gift cards (including lost gift cards, etc.) are presented as a liability on the consolidated balance sheets. The allowance for unredeemed gift cards was $242,093 and $208,877 as of December 31, 2023 and 2022, respectively. The liability is reduced by an annual estimated amount of breakage calculated as 6% of total activations over the past five years which was $33,216 and $31,297 for the years ended December 31, 2023 and 2022, respectively.
DEFERRED VENDOR ALLOWANCE:
Initial contract sign-on advances received from vendors are recorded as deferred revenue and are recognized as income each year based on the product usage for the year as a percentage of the total product usage required under the contract. The income is included as an offset to cost of restaurant sales. There is no deferred vendor allowance as of December 31, 2023. The deferred vendor allowance was $27,000 as of December 31, 2022 and is included in other long-term liabilities in the accompanying consolidated balance sheet.
REVENUE RECOGNITION:
The Company recognizes revenue in accordance with ASC 606, which provides that revenues are to be recognized when control of promised goods or services is transferred to a customer in an amount that reflects the consideration expected to be received for those goods or services.
Restaurant Sales – Substantially all re
Source: Item 23 — RECEIPTS (FDD pages 46–257)
What This Means (2025 FDD)
According to Monicals Pizza's 2025 Franchise Disclosure Document, the allowance for unredeemed gift cards as of December 31, 2023, was $242,093. This figure represents the amount set aside to cover the liability associated with outstanding gift cards that have not yet been redeemed by customers. The company administers a gift card program, and these unredeemed cards are considered a liability on the consolidated balance sheets.
Monicals Pizza reduces this liability by an estimated amount of breakage, which is calculated annually. For the year ended December 31, 2023, the breakage was calculated as 6% of total gift card activations over the past five years, amounting to $33,216. Breakage refers to the portion of gift cards that are not expected to be redeemed due to loss, expiration, or other reasons.
For a prospective franchisee, understanding the gift card program and its accounting implications is important. The allowance for unredeemed gift cards and the breakage calculation can affect the financial statements of Monicals Pizza. While franchisees may not directly manage this specific accounting item at the corporate level, it reflects the overall financial health and practices of the company, which can indirectly impact their business.