Note 8. Restaurant Operations Revenues

6 Months Ended

Jun. 30, 2019

Note 8. Restaurant Operations Revenues

Note 8. Restaurant Operations Revenues

Restaurant operations revenues were as follows. 

	Second Quarter				First Six Months
	2019		2018		2019		2018
Net sales	$	152,062	$	191,797	$	317,693	$	377,368
Franchise royalties and fees		7,146		7,773		14,058		14,875
Other		853		1,024		2,085		2,285
	$	160,061	$	200,594	$	333,836	$	394,528

Net sales

Net sales were composed of retail sales of food through Company-owned stores. Company-owned store revenues are recognized when control of the food items are transferred to our customers at the point of sale. Sales taxes related to these sales are collected from customers and remitted to the appropriate taxing authority and are not reflected in the Company’s consolidated statements of earnings as revenue.

Franchise royalties and fees

Franchise royalties and fees are composed of royalties and fees from Steak n Shake and Western Sizzlin franchisees. Royalty revenues are based on a percentage of franchise sales and are recognized when the retail food items are purchased by franchise customers. Initial franchise fees received are deferred when amounts are received and recognized as revenue on a straight-line basis over the term of each respective franchise agreement, which is typically 20 years.

Our advertising arrangements with franchisees are reported in franchise royalties and fees.

Gift card revenue

Restaurant operations sells gift cards to customers which can be redeemed for retail food sales within our stores. Gift cards are recorded as deferred revenue when issued and are subsequently recorded as net sales upon redemption. Restaurant operations estimates breakage related to gift cards when the likelihood of redemption is remote. This estimate utilizes historical trends based on the vintage of the gift card. Breakage on gift cards is recorded as other revenue in proportion to the rate of gift card redemptions by vintage.