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REVENUE RECOGNITION
 3 Months Ended
Sep. 30, 2019
Revenue from Contract with Customer [Abstract]  
REVENUE RECOGNITION REVENUE RECOGNITION:

Revenue Recognition and Deferred Revenue:

Revenue recognized at point in time
Company-owned salon revenues are recognized at the time when the services are provided. Product revenues for Company-owned salons are recognized when the guest receives and pays for the merchandise. Revenues from purchases made with gift cards are also recorded when the guest takes possession of the merchandise or services are provided. Gift cards issued by the Company are recorded as a liability (deferred revenue) upon sale and recognized as revenue upon redemption by the customer. Gift card breakage, the amount of gift cards which will not be redeemed, is recognized proportional to redemptions using estimates based on historical redemption patterns. Product sales by the Company to its franchisees are included within product revenues in the unaudited Condensed Consolidated Statement of Operations and recorded at the time product is delivered to the franchisee. Payment terms for franchisee product revenue are within 30 to 90 days of delivery.

Revenue recognized over time
Franchise revenues primarily include royalties, advertising fund fees, franchise fees and other fees. Royalty and advertising fund revenues represent sales-based royalties that are recognized in the period in which the sales occur. Generally, royalty and advertising fund revenue is billed and collected monthly in arrears. Advertising fund revenues and expenditures, which must be spent on marketing and related activities per the franchise agreements, are recorded on a gross basis within the unaudited Condensed Consolidated Statement of Operations. This increases both the gross amount of reported franchise revenue and site operating expense and generally has no impact on operating income and net income. Franchise fees are billed and received upon the signing of the franchise agreement. Recognition of these fees is deferred until the salon opening and is then recognized over the term of the franchise agreement, typically ten years. Franchise rental income is a result of the Company signing leases on behalf of franchisees and entering into a sublease arrangement with the franchisee. The Company recognizes franchise rental income and expense when it is due to the landlord.

The following table disaggregates revenue by timing of revenue recognition and is reconciled to reportable segment revenues as follows:
 
 
Three Months Ended September 30, 2019
 
Three Months Ended September 30, 2018
 
 
Franchise
 
Company-owned
 
Franchise
 
Company-owned
 
 

 
 
 
 
 
 
Revenue recognized at a point in time:
 
 
 
 
 
 
 
 
Service
 
$
—

 
$
141,941

 
$
—

 
$
207,848

Product
 
13,105

 
32,551

 
15,629

 
41,962

Total revenue recognized at a point in time
 
$
13,105

 
$
174,492

 
$
15,629

 
$
249,810

 
 

 
 
 
 
 
 
Revenue recognized over time:
 
 
 
 
 
 
 
 
Royalty and other franchise fees
 
$
17,592

 
$
—

 
$
14,420

 
$
—

Advertising fund fees
 
10,425

 
—

 
7,976

 
—

Franchise rental income
 
31,424

 
—

 
 
 
 
Total revenue recognized over time
 
$
59,441

 
$
—

 
$
22,396

 
$
—

Total revenue
 
$
72,546

 
$
174,492

 
$
38,025

 
$
249,810



Information about receivables, broker fees and deferred revenue subject to the amended revenue recognition guidance is as follows:
 
 
September 30,
2019
 
June 30,
2019
 
Balance Sheet Classification
 
 
(dollars in thousands)
 
 
Receivables from contracts with customers, net
 
$
18,715

 
$
23,210

 
Accounts receivable, net
Broker fees
 
$
18,706

 
$
17,819

 
Other assets
 
 
 
 
 
 
 
Deferred revenue:
 
 
 
 
 
 
     Current
 
 
 
 
 
 
Gift card liability
 
$
2,686

 
$
3,050

 
Accrued expenses
Deferred franchise fees unopened salons
 
99

 
193

 
Accrued expenses
Deferred franchise fees open salons
 
4,748

 
4,164

 
Accrued expenses
Total current deferred revenue
 
$
7,533

 
$
7,407

 
 
     Non-current
 
 
 
 
 
 
Deferred franchise fees unopened salons
 
$
13,230

 
$
15,173

 
Other non-current liabilities
Deferred franchise fees open salons
 
28,546

 
24,194

 
Other non-current liabilities
Total non-current deferred revenue
 
$
41,776

 
$
39,367

 
 

Receivables relate primarily to payments due for royalties, franchise fees, advertising fees, franchise product sales and sales of salon services and product paid by credit card. The receivables balance is presented net of an allowance for expected losses (i.e., doubtful accounts), primarily related to receivables from franchisees. As of September 30, 2019 and June 30, 2019, the balance in the allowance for doubtful accounts was approximately $2.0 million. Broker fees are the costs associated with using external brokers to identify new franchisees. These fees are paid upon the signing of the franchise agreement and recognized as General and Administrative expense over the term of the agreement.

The following table is a rollforward of the broker fee balance for the periods indicated (in thousands):
Balance as of June 30, 2019
 
$
17,819

Additions
 
1,548

Amortization
 
(661
)
Write-offs
 
—

Balance as of September 30, 2019
 
$
18,706



Deferred revenue includes the gift card liability and deferred franchise fees for unopened salons and open salons. Gift card revenue for the three months ended September 30, 2019 and 2018 was $0.8 million and $1.0 million, respectively. Deferred franchise fees related to open salons are generally recognized on a straight-line basis over the term of the franchise agreement. Franchise fee revenue for the three months ended September 30, 2019 and 2018 was $1.2 million and $0.9 million, respectively. Estimated revenue expected to the recognized in the future related to deferred franchise fees for open salons as of September 30, 2019 is as follows (in thousands):

Remainder of 2020
 
$
3,327

2021
 
4,498

2022
 
4,378

2023
 
4,202

2024
 
3,967

Thereafter
 
12,922

Total
 
$
33,294