REVENUE

3 Months Ended

Mar. 25, 2020

Revenue from Contract with Customer [Abstract]

Revenue Recognition

Revenue consists of Shack sales and licensing revenue. Generally, revenue is recognized as promised goods or services transfer to the guest or customer in an amount that reflects the consideration we expect to be entitled in exchange for those goods or services.

Revenue from Shack sales is presented net of discounts and recognized when food, beverage and retail products are sold. Sales tax collected from customers is excluded from Shack sales and the obligation is included in sales tax payable until the taxes are remitted to the appropriate taxing authorities. Revenue from our gift cards is deferred and recognized upon redemption.

Licensing revenues include initial territory fees, Shack opening fees, and ongoing sales-based royalty fees from licensed Shacks. Generally, the licenses granted to develop, open and operate each Shack in a specified territory are the predominant goods or services transferred to the licensee in our contracts, and represent distinct performance obligations. Ancillary promised services, such as training and assistance during the initial opening of a Shack, are typically combined with the licenses and considered as one performance obligation per Shack. We determine the transaction price for each contract, which is comprised of the initial territory fee, and an estimate of the total Shack opening fees we expect to be entitled to. The calculation of total Shack opening fees included in the transaction price requires judgment, as it is based on an estimate of the number of Shacks we expect the licensee to open. The transaction price is then allocated equally to each Shack expected to open. The performance obligations are satisfied over time, starting when a Shack opens, through the end of the term of the license granted to the Shack. Because we are transferring licenses to access our intellectual property during a contractual term, revenue is recognized on a straight-line basis over the license

term. Generally, payment for the initial territory fee is received upon execution of the licensing agreement, and payment for the restaurant opening fees are received either in advance of or upon opening the related restaurant. These payments are initially deferred and recognized as revenue as the performance obligations are satisfied, which occurs over a long-term period.

Revenue from sales-based royalties is recognized as the related sales occur.

Revenue recognized during the thirteen weeks ended March 25, 2020 and March 27, 2019, disaggregated by type is as follows:



	Thirteen Weeks Ended
	March 25 2020		March 27 2019
Shack sales	$	138,048	$	128,569
Licensing revenue:
Sales-based royalties	4,944		3,904
Initial territory and opening fees	178		136
Total revenue	$	143,170	$	132,609

The aggregate amount of the transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) as of March 25, 2020 was $15,929. We expect to recognize this amount as revenue over a long-term period, as the license term for each Shack ranges from 5 to 20 years. This amount excludes any variable consideration related to sales-based royalties.

Contract Balances

Opening and closing balances of contract liabilities and receivables from contracts with customers is as follows:



	March 25 2020		December 26 2019
Shack sales receivables	$	1,799	$	4,265
Licensing receivables	4,079		4,510
Gift card liability	2,134		2,258
Deferred revenue, current	545		511
Deferred revenue, long-term	11,299		11,310

Revenue recognized during the thirteen weeks ended March 25, 2020 and March 27, 2019 that was included in their respective liability balances at the beginning of the period is as follows:



	Thirteen Weeks Ended
	March 25 2020		March 27 2019
Gift card liability	$	300	$	278
Deferred revenue	175		134