NOTE 17. FRANCHISE REVENUE

The Company's Franchise segment generates revenues through product sales to franchisees, royalties, franchise fees and interest income on the financing of the franchise locations. The Company enters into franchise agreements with initial terms of ten years. The Company charges franchisees three types of flat franchise fees associated with stores: initial, transfer and renewal. The initial franchise fee is payable prior to the franchise store opening as consideration for the initial franchise rights and services performed by the Company. Transfer fees are paid as consideration for the same rights and services as the initial fee and occur when a former franchisee transfers ownership of the franchise location to a new franchisee. This is typically a reduced fee compared to the initial franchise fee. The renewal franchise fee is charged to existing franchisees upon renewal of the franchise contract. This fee is similar to, but typically less than, the initial fee.

Once the franchise store is opened, transferred or renewed, the Company has no further obligations under these fees to the franchisee. Therefore, all initial, transfer and renewal franchise fee revenue is recognized in the period in which a franchise store is opened, transferred or date the contract period is renewed. The Company recognized initial franchise fees of $5.1 million, $4.0 million, and $3.0 million for the years ended December 31, 2013, 2012 and 2011, respectively.

The following is a summary of the Company's franchise revenue by type:

	Year ended December 31,

	2013		2012		2011
	(in thousands)
Product sales	$	364,500	$	340,574	$	275,026
Royalties		58,247		53,047		46,507
Franchise fees		8,166		7,024		5,585
Other		9,551		7,463		7,674


Total franchise revenue	$	440,464	$	408,108	$	334,792