Revenues

3 Months Ended

Mar. 27, 2024

Revenue from Contract with Customer [Abstract]

Revenues

Revenues

The following table disaggregates our revenue by sales channel and type of good or service:

	Quarter Ended
	March 27, 2024		March 29, 2023
	(In thousands)
Company restaurant sales	$	52,342	$	53,452
Franchise and license revenue:
Royalties	29,306		30,027
Advertising revenue	18,138		19,668
Initial and other fees	1,816		4,990
Occupancy revenue	8,372		9,334
Franchise and license revenue	57,632		64,019
Total operating revenue	$	109,974	$	117,471

Franchise occupancy revenue consisted of the following:

	Quarter Ended
	March 27, 2024		March 29, 2023
	(In thousands)
Operating lease revenue	$	6,128	$	6,871
Variable lease revenue	2,244		2,463
Total occupancy revenue	$	8,372	$	9,334

Balances related to contracts with customers consist of receivables, contract assets, deferred franchise revenue and deferred gift card revenue. See Note 3 for details on our receivables.

Deferred franchise revenue consists primarily of the unamortized portion of initial franchise fees that are currently being amortized into revenue and amounts related to development agreements and unopened restaurants that will begin amortizing into revenue when the related restaurants are opened. Deferred franchise revenue represents our remaining performance obligations to our franchisees, excluding amounts of variable consideration related to sales-based royalties and advertising.

The components of the change in deferred franchise revenue are as follows:

	(In thousands)
Balance, December 27, 2023	$	19,150
Fees received from franchisees	220
Revenue recognized (1)	(779)
Balance, March 27, 2024	18,591
Less current portion included in other current liabilities	2,132
Deferred franchise revenue included in other noncurrent liabilities	$	16,459

(1)    Of this amount $0.7 million was included in the deferred franchise revenue balance as of December 27, 2023.

We record contract assets related to incentives and subsidies provided to franchisees related to new unit openings and/or equipment upgrades. These amounts will be recognized as a component of franchise and license revenue over the remaining term of the related franchise agreements.

The components of the change in contract assets are as follows:

	(In thousands)
Balance, December 27, 2023	$	6,608
Franchisee deferred costs	27
Contract asset amortization	(347)
Balance, March 27, 2024	6,288
Less current portion included in other current assets	1,005
Contract assets included in other noncurrent assets	$	5,283

The Company purchases equipment related to various programs for franchise restaurants, including kitchen and point-of-sale system equipment. We bill our franchisees and recognize revenue when the related equipment is installed, less amounts contributed from the Company, which have been deferred as contract assets in the table above. We recognized $0.3 million of revenue, recorded as a component of initial and other fees, related to the sale of equipment to franchisees during the quarter ended March 27, 2024. We recognized $2.4 million of revenue, recorded as a component of initial and other fees, related to the sale of equipment to franchisees during the quarter ended March 29, 2023. As of March 27, 2024, we had $0.5 million in inventory and $0.1 million in receivables related to the purchased equipment. As of December 27, 2023, we had $0.6 million in inventory and $0.3 million in receivables related to the purchased equipment.

As of March 27, 2024, deferred franchise revenue, net of contract asset amortization, expected to be recognized in the future is as follows:

	(In thousands)
Remainder of 2024	$	859
2025	1,131
2026	1,131
2027	1,100
2028	973
Thereafter	7,109
Deferred franchise revenue, net	$	12,303

Deferred gift card liabilities consist of the unredeemed portion of gift cards sold in company restaurants and at third party locations. The balance of deferred gift card liabilities represents our remaining performance obligations to our customers. The balance of deferred gift card liabilities as of March 27, 2024 and December 27, 2023 was $6.4 million and $7.8 million, respectively. During the quarter ended March 27, 2024, we recognized revenue of $0.2 million from gift card redemptions at company restaurants.