Reportable Segments

6 Months Ended

Mar. 09, 2016

Segment Reporting [Abstract]

Reportable Segments

Reportable Segments

The Company has three reportable segments: Company-owned restaurants, Culinary Contract Services (“CCS”) and Franchise Operations.

Company-owned restaurants

Company-owned restaurants consists of several brands which are aggregated into one reportable segment because the nature of the products and services, the production processes, the customers, the methods used to distribute the products and services, the nature of the regulatory environment and store level profit margin are similar. The chief operating decision maker analyzes Company-owned restaurants at store level profit which is revenue less cost of food, payroll and related costs, other operating expenses and occupancy costs. The primary brands are Luby’s Cafeterias, Fuddruckers and Cheeseburger in Paradise, with a non-core restaurant location operating under the brand name Bob Luby’s Seafood. All company-owned restaurants are casual dining restaurants. Each restaurant is an operating segment because operating results and cash flow can be determined for each restaurant.

The total number of Company-owned restaurants was 178 at March 9, 2016 and 177 at August 26, 2015.

Culinary Contract Services

CCS, branded as Luby’s Culinary Contract Services, consists of a business line servicing healthcare, higher education and corporate dining clients. The healthcare accounts are full service and typically include in-room delivery, catering, vending, coffee service and retail dining. CCS has contracts with long-term acute care hospitals, acute care medical centers, ambulatory surgical centers, behavioral hospitals and business and industry clients. CCS has the unique ability to deliver quality services that include facility design and procurement as well as nutrition and branded food services to our clients. The costs of CCS on the Consolidated Statements of Operations include all food, payroll and related costs and other operating expenses related to CCS sales.

The total number of CCS contracts was 28 at March 9, 2016 and 23 at August 26, 2015.  

Franchise Operations

We offer franchises for only the Fuddruckers brand. Franchises are sold in markets where expansion is deemed advantageous to the development of the Fuddruckers concept and system of restaurants. Initial franchise agreements have a term of 20 years. Franchise agreements typically grant franchisees an exclusive territorial license to operate a single restaurant within a specified area, usually a four-mile radius surrounding the franchised restaurant.

Franchisees bear all direct costs involved in the development, construction and operation of their restaurants. In exchange for a franchise fee, the Company provides franchise assistance in the following areas: site selection, prototypical architectural plans, interior and exterior design and layout, training, marketing and sales techniques, assistance by a Fuddruckers “opening team” at the time a franchised restaurant opens, and operations and accounting guidelines set forth in various policies and procedures manuals.

All franchisees are required to operate their restaurants in accordance with Fuddruckers’ standards and specifications, including controls over menu items, food quality and preparation. The Company requires the successful completion of its training program by a minimum of three managers for each franchised restaurant. In addition, franchised restaurants are evaluated regularly by the Company for compliance with franchise agreements, including standards and specifications through the use of periodic, unannounced, on-site inspections and standard evaluation reports.

The number of franchised restaurants was 110 at March 9, 2016 and 106 at August 26, 2015.  

Licensee

In November 1997, a prior owner of the Fuddruckers – World’s Greatest Hamburgers ® brand granted to a licensee the exclusive right to use the Fuddruckers proprietary marks, trade dress and system to develop Fuddruckers restaurants in a territory consisting of certain countries in Africa, the Middle East and parts of Asia. As of April 2016, this licensee operated 35 restaurants that are licensed to use the Fuddruckers Proprietary Marks in Saudi Arabia, Egypt, Lebanon, United Arab Emirates, Qatar, Jordan, Bahrain, Kuwait, Morocco and Malaysia. The Company does not receive revenue or royalties from these restaurants.

The table on the following page shows segment financial information. The table also lists total assets for each reportable segment. Corporate assets include cash and cash equivalents, property and equipment, assets related to discontinued operations, property held for sale, deferred tax assets and prepaid expenses.

	Quarter Ended						Two Quarters Ended
	March 9, 2016			February 11, 2015			March 9, 2016			February 11, 2015
	(12 weeks)			(12 weeks)			(28 weeks)			(24 weeks)
	(In thousands)
Sales:
Company-owned restaurants (1)	$	86,451		$	85,606		$	200,156		$	166,287
Culinary contract services	3,918			3,771			8,833			8,369
Franchise operations	1,700			1,605			3,825			3,186
Total	$	92,069		$	90,982		$	212,814		$	177,842
Segment level profit:
Company-owned restaurants	$	12,746		$	11,395		$	29,530		$	20,746
Culinary contract services	398			293			891			792
Franchise operations	1,272			1,251			2,786			2,448
Total	$	14,416		$	12,939		$	33,207		$	23,986
Depreciation and amortization:
Company-owned restaurants	$	4,318		$	4,108		$	10,128		$	8,491
Culinary contract services	27			29			64			98
Franchise operations	192			177			448			354
Corporate	683			467			1,595			906
Total	$	5,220		$	4,781		$	12,235		$	9,849
Capital expenditures:
Company-owned restaurants	$	5,128		$	7,394		$	10,622		$	10,974
Culinary contract services	—			—			—			—
Franchise operations	—			—			—			—
Corporate	113			5			348			14
Total	$	5,241		$	7,399		$	10,970		$	10,988
Loss before income taxes and discontinued operations:
Segment level profit	$	14,416		$	12,939		$	33,207		$	23,986
Opening costs	(174		)	(670		)	(571		)	(1,595		)
Depreciation and amortization	(5,220		)	(4,781		)	(12,235		)	(9,849		)
Selling, general and administrative expenses	(9,843		)	(9,381		)	(23,086		)	(18,532		)
Provision for asset impairments	(37		)	(218		)	(37		)	(218		)
Net gain on disposition of property and equipment	556			1,377			835			1,087
Interest income	1			1			2			2
Interest expense	(495		)	(569		)	(1,191		)	(1,025		)
Other income (expense), net	29			78			(90		)	258
Loss before income taxes and discontinued operations	$	(767	)	$	(1,224	)	$	(3,166	)	$	(5,886	)

	March 9, 2016		August 26, 2015
Total assets:
Company-owned restaurants(2)	$	216,131	$	218,492
Culinary contract services	3,604		1,644
Franchise operations(3)	12,558		13,034
Corporate	29,235		31,088
Total	$	261,528	$	264,258

(1) Includes vending revenue of $137 and $120 thousand for the quarters ended March 9, 2016 and February 11, 2015, respectively and $295 and $244 thousand for the two quarters ended March 9, 2016 and February 11, 2015, respectively.

(2) Company-owned restaurants segment includes $10.2 million of Fuddruckers trade name, Cheeseburger in Paradise liquor licenses, and Jimmy Buffett intangibles.

(3) Franchise operations segment includes approximately $11.9 million in royalty intangibles.