Note 3 - Reportable Segments

12 Months Ended

Aug. 26, 2015

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

Note 3. Reportable Segments

The Company has three reportable segments: Company-owned restaurants, franchise operations and Culinary Contract Services.

Company-owned restaurants

Company-owned restaurants consists of several brands which are aggregated into one reportable segment due to the following: the nature of the products and services, the production processes, the customers, the methods used to distribute the products and services, the regulatory environment, and store level profit margin is similar. The chief operating decision maker analyzes Company-owned restaurant store level profit which is defined as restaurant sales, vending revenue less cost of food, payroll and related costs, and other operating expenses and occupancy costs. The primary brands are Luby’s Cafeteria, Fuddruckers and Cheeseburger in Paradise with a couple of non-core restaurant locations under other brand names. Both Luby’s Cafeteria and Fuddruckers are casual dining, counter service restaurants. Each restaurant is an operating segment because operating results and cash flow can be determined for each restaurant.

The total number of Company-owned restaurants at the end of fiscal years 2015, 2014 and 2013 were 177, 174 and 180, respectively.

Culinary Contract Services

CCS operation, branded as Luby’s Culinary Contract Services, consists of a business line servicing healthcare, higher education and corporate dining clients. The healthcare accounts are full service and typically include in-room delivery, catering, vending, coffee service and retail dining. CCS had contracts with long-term acute care hospitals, acute care medical centers, ambulatory surgical centers, behavioral hospitals, business and industry clients, and higher education institutions. Culinary Contract Services has the unique ability to deliver quality services that include facility design and procurement as well as nutrition and branded food services to our clients. The costs of Culinary Contract Services on the Consolidated Statements of Operations includes all food, payroll and related costs, other operating expenses, and other direct general and administrative expenses related to Culinary Contract Services sales.

The total number of Culinary Contract Services contracts at the end of fiscal 2015, 2014 and 2013 were 23, 25 and 21, respectively.

Franchising

We only offer franchises for the Fuddruckers brand. Franchises are sold in markets where expansion is deemed advantageous to the development of the Fuddruckers concept and system of restaurants. Initial franchise agreements have a term of 20 years. Franchise agreements typically grant franchisees an exclusive territorial license to operate a single restaurant within a specified area, usually a four-mile radius surrounding the franchised restaurant.

Franchisees bear all direct costs involved in the development, construction and operation of their restaurants. In exchange for a franchise fee, the Company provides franchise assistance in the following areas: site selection, prototypical architectural plans, interior and exterior design and layout, training, marketing and sales techniques, assistance by a Fuddruckers “opening team” at the time a franchised restaurant opens, and operations and accounting guidelines set forth in various policies and procedures manuals.

All franchisees are required to operate their restaurants in accordance with Fuddruckers standards and specifications, including controls over menu items, food quality and preparation. The Company requires the successful completion of its training program by a minimum of three managers for each franchised restaurant. In addition, franchised restaurants are evaluated regularly by the Company for compliance with franchise agreements, including standards and specifications through the use of periodic, unannounced, on-site inspections and standards evaluation reports.

The number of franchised restaurants at the end of fiscal 2015, 2014 and 2013 were 106, 110, 116, respectively.

The table below shows financial information as required by ASC 280 for segment reporting. ASC 280 requires depreciation and amortization be disclosed for each reportable segment, even if not used by the chief operating decision maker. The table also lists total assets for each reportable segment. Corporate assets include cash and cash equivalents, tax refunds receivable, property and equipment, assets related to discontinued operations, property held for sale, deferred tax assets and prepaid expenses.

	Fisal Year Ended
	August 26, 2015			August 27, 2014			August 28, 2013
	(In thousands)
Sales:
Company-owned restaurants(1)	$	370,723		$	368,799		$	360,566
Culinary contract services		16,401			18,555			16,693
Franchise operations		6,961			7,027			6,937
Total	$	394,085		$	394,381		$	384,196
Segment level profit:
Company-owned restaurants	$	51,909		$	52,918		$	53,984
Culinary contract services		1,615			1,708			1,089
Franchise operations		5,293			5,294			5,308
Total	$	58,817		$	59,920		$	60,381
Depreciation and amortization:
Company-owned restaurants	$	18,080		$	17,357		$	16,417
Culinary contract services		164			409			440
Franchise operations		767			767			767
Corporate		2,356			1,529			752
Total	$	21,367		$	20,062		$	18,376
Total assets:
Company-owned restaurants(2)	$	218,492		$	220,793		$	203,850
Culinary contract services		1,644			2,724			3,547
Franchise operations (3)		13,034			13,906			14,674
Corporate(4)		31,088			38,012			28,574
Total	$	264,258		$	275,435		$	250,645
Capital expenditures:
Company-owned restaurants	$	19,726		$	43,075		$	30,741
Culinary contract services		18			64			95
Franchise operations		—			—			—
Corporate		634			3,045			503
Total	$	20,378		$	46,184		$	31,339
Income (loss) before income taxes and discontinued operations:
Segment level profit	$	58,817		$	59,920		$	60,381
Opening costs		(2,686	)		(2,164	)		(783	)
Depreciation and amortization		(21,367	)		(20,062	)		(18,376	)
Selling, general and administrative expenses		(38,758	)		(40,686	)		(36,123	)
Provision for asset impairments		(636	)		(2,498	)		(615	)
Net gain on disposition of property and equipment		3,994			2,357			1,723
Interest income		4			6			9
Interest expense		(2,336	)		(1,247	)		(920	)
Other income, net		520			1,101			1,026
Total	$	(2,448	)	$	(3,273	)	$	6,322

(1)   Includes vending revenue of $531, $532 and $565 thousand for the year ended August 26, 2015, August 27, 2014 and August 28, 2013, respectively. 

(2)   Company-owned restaurants segment includes $10.6 million of Fuddruckers trade name, Cheeseburger in Paradise liquor licenses, and Jimmy Buffett intangibles.

(3)   Franchise operations segment includes approximately $12.2 million in royalty intangibles.

(4)   Goodwill was disclosed in corporate segment in our fiscal 2014 Annual Report on Form 10-K and our first quarter fiscal 2015 Quarterly Report on Form 10-Q. The current draft reflects a revised classification of goodwill into the Company-owned restaurants segment.