BUSINESS AND LICENSE ACQUISITIONS

3 Months Ended

Sep. 04, 2012

BUSINESS AND LICENSE ACQUISITIONS [Abstract]

BUSINESS AND LICENSE ACQUISITIONS

NOTE D – BUSINESS AND LICENSE ACQUISITIONS

Lime Fresh Acquisition

As discussed in Note 3 to our Annual Report on Form 10-K for the year ended June 5, 2012, on April 11, 2012, we completed the acquisition of Lime Fresh, including the assets of seven Lime Fresh concept restaurants, the royalty stream from five Lime Fresh concept franchised restaurants (one of which was not yet open), and the Lime Fresh brand's intellectual property for $24.1 million.  During the quarter ended September 4, 2012, we made adjustments to the preliminary purchase price allocation as follows (in thousands):

	As Previously			Fiscal 2013
	Reported			Adjustments			As Adjusted
Trademarks	$	11,100		$	–		$	11,100
Goodwill		7,989			1,033			9,022
Acquired franchise rights		2,460			(960	)		1,500
Property and equipment		2,405			–			2,405
Deferred income taxes		19			(13	)		6
Other, net		(923	)		(60	)		(983	)
Net impact on Condensed Consolidated Balance Sheet		23,050			–			23,050
Write-off of previous license agreement		1,034			–			1,034
Aggregate cash purchase price	$	24,084		$	–		$	24,084

For the year ended June 5, 2012, a $1.0 million loss on the write-off of a previous license agreement, representing the balance remaining from the September 13, 2010 licensing agreement with LFMG International, LLC, was included in Other restaurant operating costs in our fiscal 2012 Consolidated Statement of Operations.

We recorded $9.0 million of goodwill due to the purchase price exceeding the estimated fair value of the net assets acquired.  Of the goodwill recorded, we anticipate that an insignificant amount will be nondeductible for tax purposes.

We amortize the $11.1 million of acquired trademarks over a ten year period.  We amortize the $1.5 million of acquired franchise rights associated with this acquisition on a straight-line basis over the remaining term of the franchise operating agreements, which are approximately five to nine years from the date of acquisition.

On June 7, 2012, we entered into two marketing agreements with 50 Eggs Branding Company, LLC ("50 Eggs").  John Kunkel, the CEO of 50 Eggs, previously was the CEO of LFMG International, LLC, and is a current Lime Fresh franchisee.  Under the terms of the first agreement, 50 Eggs will provide marketing services for our Lime Fresh concept for a monthly fee of $52,500 plus out of pocket expenses.  Under the terms of the second agreement, 50 Eggs will provide marketing services for our Marlin & Ray's concept for a monthly fee of $26,250 plus out of pocket expenses.  Both agreements expire on June 6, 2013.  During the 13 weeks ended September 4, 2012, we made payments of $0.3 million to 50 Eggs in connection with these agreements.

License Acquisitions

On July 22, 2010, following the approval of the Audit Committee of our Board of Directors, we entered into a licensing agreement with Gourmet Market, Inc. which is owned by our Chief Executive Officer's brother, Price Beall.  The licensing agreement allows us to operate multiple restaurants under the Truffles name.  Truffles is an upscale café concept that currently operates several restaurants in the vicinity of Hilton Head Island, South Carolina.  The Truffles concept offers a diverse menu featuring soups, salads, and sandwiches, a signature chicken pot pie, house-breaded fried shrimp, pasta, ribs, steaks, and a variety of desserts.

Under the terms of the agreement, we pay a licensing fee to Gourmet Market, Inc. of 2.0% of gross sales of any Truffles we open.  Additionally, we pay Gourmet Market, Inc. a monthly fee for up to two years for consulting services to be provided by Price Beall to assist us in developing and opening Truffles restaurants under the terms of the licensing agreement.  During the first 12 months of the agreement we paid $20,833 per month for such services.  During the second 12 months of the agreement we paid $10,417 per month.  Gourmet Market, Inc. has the option to terminate future development rights if we do not operate 18 or more Truffles restaurants within five years or 40 or more Truffles within 10 years of the effective date of the agreement.  Based on having opened two Truffles to date and our current growth plans for the next few years, it is not likely that we will open 18 or more Truffles restaurants within five years or 40 or more Truffles within 10 years.  During the 13 weeks ended September 4, 2012 and August 30, 2011, we paid Gourmet Market, Inc. $38,826 and $59,831, respectively, under the terms of the agreement.