REVENUE

9 Months Ended

Jul. 09, 2023

Revenue from Contract with Customer [Abstract]

REVENUE

REVENUE

Nature of products and services — The Company derives revenue from retail sales at Jack in the Box and Del Taco company-operated restaurants and rental revenue, royalties, advertising, and franchise and other fees from franchise-operated restaurants.

Our franchise arrangements generally provide for an initial franchise fee per restaurant for a 20-year term, and generally require that franchisees pay royalty and marketing fees based upon a percentage of gross sales. The agreements also require franchisees to pay technology fees, as well as sourcing fees for Jack in the Box franchise agreements.

Disaggregation of revenue — The following table disaggregates revenue by segment and primary source for the quarter ended July 9, 2023 (in thousands):

	Quarter						Year-to-date
	Jack in the Box		Del Taco		Total		Jack in the Box		Del Taco		Total
Company restaurant sales	$	96,820	$	101,696	$	198,516	$	318,451	$	352,860	$	671,311
Franchise rental revenues	83,271		2,977		86,248		270,277		8,321		278,598
Franchise royalties	47,373		6,130		53,503		161,343		18,721		180,064
Marketing fees	47,323		5,004		52,327		154,153		15,268		169,421
Technology and sourcing fees	4,037		844		4,881		12,881		2,230		15,111
Franchise fees and other services	1,387		80		1,467		4,855		422		5,277
Total revenue	$	280,211	$	116,731	$	396,942	$	921,960	$	397,822	$	1,319,782

The following table disaggregates revenue by segment and primary source for the quarter ended July 10, 2022 (in thousands):

	Quarter						Year-to-date
	Jack in the Box		Del Taco		Total		Jack in the Box		Del Taco		Total
Company restaurant sales	$	100,899	$	114,332	$	215,231	$	315,205	$	171,391	$	486,596
Franchise rental revenues	78,278		1,790		80,068		257,069		2,654		259,723
Franchise royalties	44,291		5,361		49,652		144,872		8,006		152,878
Marketing fees	42,620		4,359		46,979		139,811		6,517		146,328
Technology and sourcing fees	3,548		420		3,968		12,123		625		12,748
Franchise fees and other services	2,340		67		2,407		6,944		93		7,037
Total revenue	$	271,976	$	126,329	$	398,305	$	876,024	$	189,286	$	1,065,310

In October 2022, a Jack in the Box franchise operator paid the Company $7.3 million in order to sell his restaurants to a new franchisee at the current standard royalty rate, which is lower than the royalty rate in the existing franchise agreements. The payment represented the difference between the existing royalty rate and the new royalty rate based on projected future sales for the remaining term of the existing agreements. The payment is non-refundable and not subject to any adjustments based on actual future sales. The Company determined the transaction represented the termination of the existing agreement rather than the transfer of an agreement between franchisees. As such, the $7.3 million was recognized in franchise royalty revenue during the first quarter of 2023.

Contract liabilities — Contract liabilities consist of deferred revenue resulting from initial franchise and development fees received from franchisees for new restaurant openings or new franchise terms, which are recognized over the franchise term. The Company classifies these contract liabilities as “Accrued liabilities” and “Other long-term liabilities” in our condensed consolidated balance sheets.

A summary of significant changes in contract liabilities is presented below (in thousands):

	Year-to-date
	July 9, 2023		July 10, 2022
Deferred franchise and development fees at beginning of period	$	46,449	$	41,520
Changes due to business combinations	—		6,193
Revenue recognized	(4,140)		(4,238)
Additions	6,665		3,023
Deferred franchise and development fees at end of period	$	48,974	$	46,498

As of July 9, 2023, approximately $7.4 million of development fees related to unopened restaurants are included in deferred revenue. Timing of revenue recognition for development fees related to unopened restaurants is dependent upon the timing of restaurant openings and are recognized over the franchise term at the date of opening.

The following table reflects the estimated franchise fees to be recognized in the future related to performance obligations that are unsatisfied as of July 9, 2023 (in thousands):

Remainder of 2023	$	1,206
2024	5,074
2025	4,840
2026	4,513
2027	4,158
Thereafter	21,775
	$	41,566

The Company has applied the optional exemption, as provided for under ASC Topic 606, Revenue from Contracts with Customers, which allows us to not disclose the transaction price allocated to unsatisfied performance obligations when the transaction price is a sales-based royalty.