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Revenues Revenues (Notes)
6 Months Ended
Jun. 30, 2020
Revenues [Abstract]  
Revenues [Text Block] Revenues
The following table disaggregates our revenue for the periods ended June 30, 2020 and 2019:
 Three Months Ended June 30, 2020
 
Rent-A-Center Business
Preferred LeaseMexicoFranchisingConsolidated
(In thousands)
Store
Rentals and fees$385,338  $139,440  $9,959  $—  $534,737  
Merchandise sales55,741  51,690  649  —  108,080  
Installment sales17,643  —  —  —  17,643  
Other470  113   189  775  
Total store revenues459,192  191,243  10,611  189  661,235  
Franchise
Merchandise sales—  —  —  18,047  18,047  
Royalty income and fees—  —  —  4,464  4,464  
Total revenues$459,192  $191,243  $10,611  $22,700  $683,746  
 Six Months Ended June 30, 2020
 
Rent-A-Center Business
Preferred LeaseMexicoFranchisingConsolidated
(In thousands)
Store
Rentals and fees$778,503  $301,438  $22,796  $—  $1,102,737  
Merchandise sales102,428  105,678  1,354  —  209,460  
Installment sales32,390  —  —  —  32,390  
Other836  254   400  1,497  
Total store revenues914,157  407,370  24,157  400  1,346,084  
Franchise
Merchandise sales—  —  —  30,484  30,484  
Royalty income and fees—  —  —  9,117  9,117  
Total revenues$914,157  $407,370  $24,157  $40,001  $1,385,685  

 Three Months Ended June 30, 2019
 
Rent-A-Center Business
Preferred LeaseMexicoFranchisingConsolidated
(In thousands)
Store
Rentals and fees$399,799  $139,104  $12,777  $—  $551,680  
Merchandise sales32,935  37,140  767  —  70,842  
Installment sales17,270  —  —  —  17,270  
Other1,092  145   —  1,244  
Total store revenues451,096  176,389  13,551  —  641,036  
Franchise
Merchandise sales—  —  —  10,673  10,673  
Royalty income and fees—  —  —  4,216  4,216  
Total revenues$451,096  $176,389  $13,551  $14,889  $655,925  

 Six Months Ended June 30, 2019
 
Rent-A-Center Business
Preferred LeaseMexicoFranchisingConsolidated
(In thousands)
Store
Rentals and fees$807,379  $282,297  $25,358  $—  $1,115,034  
Merchandise sales83,493  90,296  1,523  —  175,312  
Installment sales32,706  —  —  —  32,706  
Other1,575  318  15  —  1,908  
Total store revenues925,153  372,911  26,896  —  1,324,960  
Franchise
Merchandise sales—  —  —  19,129  19,129  
Royalty income and fees—  —  —  8,530  8,530  
Total revenues$925,153  $372,911  $26,896  $27,659  $1,352,619  
Rental-Purchase Agreements
Rent-A-Center Business, Preferred Lease, and Mexico
Rentals and Fees. Rental merchandise is leased to customers pursuant to rental purchase agreements, which provide for weekly, semi-monthly or monthly rental terms with non-refundable rental payments. At the expiration of each rental term, customers may renew the rental agreement for the next rental term. Generally, the customer has the right to acquire title of the merchandise either through a purchase option or through payment of all required rental terms. Customers can terminate the rental agreement at the end of any rental term without penalty. Therefore, rental transactions are accounted for as operating leases.
Rental payments received at our Rent-A-Center Business, Preferred Lease (excluding virtual) and Mexico locations must be prepaid in advance of the next rental term. Under the virtual business model, revenues are earned prior to the rental payment due date. Therefore, virtual business revenue is accrued prior to receipt of the rental payment, net of estimated returns and uncollectible renewal payments. Under both models, rental revenue is recognized over the rental term. See Note 4 for additional information regarding accrued rental revenue and the related allowances for returns and uncollectible payments.
Cash received for rental payments, including fees, prior to the period in which it should be recognized, is deferred and recognized according to the rental term. At June 30, 2020 and December 31, 2019, we had $42.5 million and $39.9 million, respectively, in deferred revenue included in accrued liabilities related to our rental purchase agreements. Revenue related to various payment, reinstatement or late fees is recognized when paid by the customer at the point service is provided. Rental merchandise is depreciated using the income forecasting method and is recognized in cost of sales over the rental term.
We also offer additional product plans along with our rental agreements which provide customers with liability protection against significant damage or loss of a product, and club membership benefits, including various discount programs, product service and replacement benefits in the event merchandise is damaged or lost, and payment insurance in the event eligible customers become unemployed. Customers renew product plans in conjunction with their rental term renewals, and can cancel the plans at any time. Revenue for product plans is recognized over the term of the plan. Costs incurred related to product plans are primarily recognized in cost of sales.
Revenue from contracts with customers
Rent-A-Center Business, Preferred Lease, and Mexico
Merchandise Sales. Merchandise sales include payments received for the exercise of the early purchase option offered through our rental purchase agreements or merchandise sold through point of sale transactions. Revenue for merchandise sales is recognized when payment is received and ownership of the merchandise passes to the customer. The remaining net value of merchandise sold is recorded to cost of sales at the time of the transaction.
Installment Sales. Revenue from the sale of merchandise in our retail installment stores is recognized when the installment note is signed and control of the merchandise has passed to the customer. The cost of merchandise sold through installment agreements is recognized in cost of sales at the time of the transaction. We offer extended service plans with our installment agreements which are administered by third parties and provide customers with product service maintenance beyond the term of the installment agreement. Payments received for extended service plans are deferred and recognized, net of related costs, when the installment payment plan is complete and the service plan goes into effect. Customers can cancel extended service plans at any time during the installment agreement period and receive a refund for payments previously made towards the plan. At both June 30, 2020 and December 31, 2019, we had $2.9 million in deferred revenue included in accrued liabilities related to extended service plans.
Other. Other revenue primarily consists of other miscellaneous product plans offered to our rental and installment customers. Revenue for other product plans is recognized in accordance with the terms of the applicable plan agreement.
Franchising
Merchandise Sales. Revenue from the sale of rental merchandise is recognized upon shipment of the merchandise to the franchisee.
Royalty Income and Fees. Franchise royalties, including franchisee contributions to corporate advertising funds, represent sales-based royalties calculated as a percentage of gross rental payments and sales. Royalty revenue is accrued and recognized as rental payments and merchandise sales occur. Franchise fees are initial fees charged to franchisees for new or converted franchise stores. Franchise fee revenue is recognized on a straight-line basis over the term of the franchise agreement. At June
30, 2020 and December 31, 2019, we had $4.2 million and $4.5 million, respectively, in deferred revenue included in accrued liabilities related to franchise fees.