REVENUE FROM CONTRACTS WITH CUSTOMERS

Adoption of Topic 606, "Revenue from Contracts with Customers"

On December 28, 2017, the Company adopted Topic 606 using the modified retrospective method applied to those contracts, which were not fully satisfied as of December 28, 2017. Results for reporting periods beginning after December 28, 2017, are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 605.

Revenue Recognition

Nature of products and services

The Company has two revenue streams, company-operated restaurant revenue and franchise related revenue. See Note 2 for a description of the revenue recognition policies.

Franchise and franchise advertising revenue

Franchise revenue consists of franchise royalties, initial franchise fees, license fees due from franchisees, IT support services, and rental income for subleases to franchisees. Franchise advertising revenue consists of advertising contributions received from franchisees.

Disaggregated revenue

The following table presents our revenues for the years ended December 25, 2019 and December 26, 2018 disaggregated by revenue source and market (in thousands):



	December 25, 2019		December 26, 2018
Core Market⁽¹⁾:
Company-operated restaurant revenue	$	351,624	$	340,421
Franchise revenue	14,918		14,144
Franchise advertising fee revenue	11,049		10,831
Total core market	$	377,591	$	365,396
Non-Core Market⁽²⁾:
Company-operated restaurant revenue	$	39,488	$	48,414
Franchise revenue	13,901		11,627
Franchise advertising fee revenue	11,350		10,391
Total non-core market	$	64,739	$	70,432
Total revenue	$	442,330	$	435,828

⁽¹⁾Core Market includes markets with existing company-operated restaurants at the time of the Company's Initial Public Offering ("IPO") on July 28, 2014.

⁽²⁾Non-Core Market includes markets entered into by the Company subsequent to the IPO date.

The following table presents our revenues disaggregated by geographic market for the years ended December 25, 2019 and December 26, 2018:



	December 25, 2019		December 26, 2018
Greater Los Angeles area market	70.5	%	69.2	%
Other markets	29.5	%	30.8	%
Total	100	%	100	%

Contract balances

The following table provides information about the change in the franchise contract liability balances during the year ended December 25, 2019 and December 26, 2018 (in thousands):



December 27, 2017	$	5,759
Revenue recognized - beginning balance	(396		)
Additional contract liability	365
Revenue recognized - additional contract liability	(135		)
December 26, 2018	$	5,593
Revenue recognized - beginning balance	(441		)
Additional contract liability	1,457
Revenue recognized - additional contract liability	(292		)
December 25, 2019	$	6,317

The Company’s franchise contract liability includes development fees, initial franchise and license fees, franchise renewal fees, lease subsidies and royalty discounts and is included within other accrued expenses and current liabilities and other noncurrent liabilities within the accompanying consolidated balance sheets. The Company receives area development fees from franchisees when they execute multi-unit area development agreements. Initial franchise and license fees, or franchise renewal fees, are received from franchisees upon the execution of, or renewal of, a franchise agreement. Revenue is recognized from these agreements as the underlying performance obligation is satisfied, which is over the term of the agreement.

For the year ended December 25, 2019, there was an increase to the contract liability balance due to the Company's completion of the sale of four company-operated restaurants within the San Francisco area to an existing franchisee and seven company-operated restaurants in the Phoenix area to another existing franchisee. This resulted in an additional contract liability of $0.7 million, relating to allocation of the transaction price to various performance obligations under the applicable contracts of the sale.

The following table illustrates the estimated revenue to be recognized in the future related to performance obligations that are unsatisfied as of December 25, 2019:



Franchise revenues (in thousands):
2020	$	705
2021	515
2022	434
2023	420
2024	406
Thereafter	3,837
Total	$	6,317

Contract Costs

The Company does not currently incur costs to obtain or fulfill a contract that would be considered contract assets under Topic 606.