Reportable Segments

3 Months Ended

Nov. 21, 2012

Reportable Segments

Note 3. Reportable Segments

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

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 and other operating expenses. The primary brands are Luby’s Cafeteria and Fuddruckers with a couple of non-core restaurant locations under other brand names (i.e., Koo Koo Roo California Bistro and Bob Luby’s Seafood). Both Luby’s and Fuddruckers are casual dining, counter service 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 158 at November 21, 2012 and 154 at August 29, 2012.

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 had contracts with long-term acute care hospitals, acute care medical centers, ambulatory surgical centers, behavioral hospitals, business and industry clients, and higher education institutions. 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 culinary contract services on the Consolidated Statements of Operations includes all food, payroll and related costs and other operating expenses related to CCS sales.

The total number of CCS contracts was 18 at November 21, 2012 and August 29, 2012.

Franchising

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 standards evaluation reports.

The number of franchised restaurants was 121 at November 21, 2012 and 125 at August 29, 2012.

The table below shows financial information as required by ASC 280 for segment reporting. ASC 280 requires depreciation and amortization be disclosed for each reportable segment, even if not used by the chief operating decision maker. The table also lists total assets for each reportable segment. Corporate assets include cash and cash equivalents, tax refunds receivable, property and equipment, assets related to discontinued operations, property held for sale, deferred tax assets, prepaid expenses, intangible assets and goodwill.

	Quarter Ended
	November 21, 2012			November 23, 2011
	(12 weeks)			(12 weeks)
	(In Thousands)
Sales:
Company-owned restaurants	$	74,090		$	73,307
Culinary contract services		3,841			4,536
Franchising		1,522			1,482
Total		79,453			79,325
Segment level profit:
Company-owned restaurants	$	9,877		$	10,200
Culinary contract services		375			430
Franchising		1,522			1,482
Total		11,774			12,112
Depreciation and amortization:
Company-owned restaurants	$	3,675		$	3,648
Culinary contract services		108			114
Franchising		177			177
Corporate		176			175
Total		4,136			4,114
Capital expenditures:
Company-owned restaurants	$	(4,820	)	$	(4,445	)
Culinary contract services		(1	)		(32	)
Franchising		0			0
Corporate		(53	)		(42	)
Total		(4,874	)		(4,519	)
Income before income taxes and discontinued operations:
Segment level profit	$	11,774		$	12,112
Opening costs		(206	)		(35	)
Depreciation and amortization		(4,136	)		(4,114	)
General and administrative expenses		(7,378	)		(6,810	)
Provision for asset impairments, net		(90	)		(175	)
Net gain (loss) on disposition of property and equipment		242			(9	)
Interest income		2			1
Interest expense		(175	)		(279	)
Other income, net		234			217
Total	$	267		$	908
	November 21, 2012			August 29, 2012
Total assets:
Company-owned restaurants	$	182,874		$	182,290
Culinary contract services		3,577			3,774
Franchising		14,954			15,352
Corporate		28,851			29,601
Total		230,256			231,017