REVENUE RECOGNITION

12 Months Ended

Jun. 30, 2021

Revenue from Contract with Customer [Abstract]

REVENUE RECOGNITION

REVENUE RECOGNITION:

Revenue Recognition and Deferred Revenue:

Revenue recognized at point of sale

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 to franchisees are included within product revenues in the Consolidated Statement of Operations and recorded at the time product is delivered to the franchisee. Payment for franchisee product revenue is generally collected within 30 to 90 days of delivery.

Revenue recognized over time

Franchise revenues primarily include royalties, advertising fund cooperatives 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 Consolidated Statement of Operations. This treatment 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 franchise. 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:

	Year Ended June 30, 2021				Year Ended June 30, 2020				Year Ended June 30, 2019
	Franchise		Company-owned		Franchise		Company-owned		Franchise		Company-owned
	(Dollars in thousands)
Revenue recognized at a point in time:
Service	$	—	$	108,120	$	—	$	331,538	$	—	$	749,660
Product	56,699		34,845		52,421		85,165		59,905		165,713
Total revenue recognized at a point in time	$	56,699	$	142,965	$	52,421	$	416,703	$	59,905	$	915,373
Revenue recognized over time:
Royalty and other franchise fees	$	66,034	$	—	$	60,061	$	—	$	59,688	$	—
Advertising fund fees	22,023		—		13,341		—		34,073		—
Franchise rental income	127,392		—		127,203		—		—		—
Total revenue recognized over time	215,449		—		200,605		—		93,761		—
Total revenue	$	272,148	$	142,965	$	253,026	$	416,703	$	153,666	$	915,373

Information about receivables, broker fees and deferred revenue subject to the revenue recognition guidance is as follows:

	June 30, 2021		June 30, 2020		Balance Sheet Classification
	(Dollars in thousands)
Receivables from contracts with customers, net	$	19,112	$	22,991	Accounts receivable, net
Broker fees	19,254		20,516		Other assets
Deferred revenue:
Current
Gift card liability	$	2,240	$	2,543	Accrued expenses
Deferred franchise fees unopened salons	40		77		Accrued expenses
Deferred franchise fees open salons	5,884		5,537		Accrued expenses
Total current deferred revenue	$	8,164	$	8,157
Non-current
Deferred franchise fees unopened salons	$	6,571	$	11,855	Other non-current liabilities
Deferred franchise fees open salons	32,365		33,623		Other non-current liabilities
Total non-current deferred revenue	$	38,936	$	45,478

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), related to receivables from franchisees. The following table is a rollforward of the allowance for doubtful accounts for the periods indicated (in thousands):

Balance as of June 30, 2020	$	6,899
Provision for doubtful accounts (1)	509
Provision for franchisee rent (2)	1,920
Write-offs	(1,554)
Balance as of June 30, 2021	$	7,774

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(1)The provision for doubtful accounts is recognized as General and administrative expense in the Consolidated Statement of Operations.

(2)The provision for franchisee rent is recognized as Rent in the Consolidated Statement of Operations.

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, 2020	$	20,516
Additions	2,112
Amortization	(3,180)
Write-offs	(194)
Balance as of June 30, 2021	$	19,254

Deferred revenue includes the gift card liability and deferred franchise fees for unopened salons and open salons. Gift card revenue for the years ended June 30, 2021, 2020 and 2019 was $0.9, $2.4 and $5.3 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 years ended June 30, 2021, 2020 and 2019 was $6.6, $5.2 and $3.6 million, respectively. Estimated revenue expected to be recognized in the future related to deferred franchise fees for open salons as of June 30, 2021 is as follows (in thousands):

2022	$	5,884
2023	5,820
2024	5,585
2025	5,208
2026	4,734
Thereafter	11,018
Total	$	38,249